Parliamentary Secretary Tonio Fenech said yesterday that workings tabled in Parliament on Monday by Opposition social solidarity spokesman Karl Chircop at the opening of the debate on pension reform were wrong.
Mr Fenech said in Parliament that in comparing the current pensions system with the new one which the government was introducing, Dr Chircop had inflated the current pension receipts of low and middle income workers (having wages of Lm75 and Lm93 respectively).
As a result he had argued that such workers would only see a one per cent increase in their pensions under the new system.
Mr Fenech said that in actual fact the pension of low income workers would rise by 41 per cent. Those on a middle income would see their pension grow by 34 per cent and the pension of top earners would rise by 39 per cent.
Rather than being socially unjust, as Labour had claimed, this new system would therefore be fair on everyone, with proper consideration of the social security contributions one would have paid during one's working life.
In his speech Mr Fenech said demographic changes meant the pensions system could not be sustained in the future. This was a challenge which had to be faced, not ignored as Labour was now doing. Indeed, Labour was contradicting itself. Then Finance Minister Leo Brincat in the Budget speech of 1998 spoke on the urgent need to address the pensions system because it was becoming unsustainable. He also spoke on the need for private pension funds. How different from what Labour spokesman Karl Chircop was saying now!
Hadn't Labour realised that current pension levels were not even adequate for a decent standard of living within five years? So how could an opposition which wanted to be credible argue that discussion on pension reform should be relaunched in 2009?
Labour's economic regeneration plan, published in 2004, had declared that the current pension levels were far too low and would cause financial hardship for people who retired in 2010. So, again, how could the debate on pensions be relaunched in 2009?
But what was even more startling was the way how Dr Chircop had mixed up his figures on Monday, saying that there would have been a surplus of Lm45 million from social security contributions in 2004 if that revenue was channelled only to contributory pensions. But then, where would the money for health services and non-contributory pensions have come from?
Indeed, the welfare gap in 2004 was Lm63 million, rising to Lm68 million a year later. By 2009, when Dr Sant wanted to launch his studies, the welfare gap would reach Lm96 million. So how was Labour proposing to bridge this gap, especially once it wanted to postpone decisions and subsequent action?
Labour was claiming that the economy should grow before pension reform was taken in hand. But what would happen if it did not? After all, Labour's record of economic growth was far from rosy.
Mr Fenech said there was no alternative to raising the retirement age once people were remaining active for longer and in future there would be fewer young workers who could fund pensions. That Dr Chircop was claiming that Labour would repeal the raising of the retirement age only reflected short-sighted policy.
The raising of the amount of social security contributions needed for a pension was another responsible decision by this government. The new system, however, included opt-outs such that workers who paid contributions for 40 years could retire before turning 65.
Furthermore, the fact that the pension would be calculated on the basis of the best 10 years of one's income over a period of 40 years, rather than the current system of the best three years in the last 10 years, would also benefit many people because in many cases now, careers peaked early and not at the end.
It was also significant that this Bill provided that the minimum pension would rise every year, the maximum pensionable income would rise to Lm9,000 and, from 2014, the thresholds would be raised on the basis of the inflation index and wage inflation. This made for adequacy as well as sustainability of pensions.
Touching briefly on second and third pillar pensions, Mr Fenech said this Bill established the framework for a second pillar pension, which had to be mandatory if it were to be effective. However the government had decided not to introduce this system for the time being. The Bill did provide, however, for periodic reviews of the pensions system, and decisions would therefore be taken according to the circumstances of that time.
Furthermore, the government would, in the forthcoming pre-budget document, propose financial benefits for those opting for a voluntary pension scheme and they would henceforth not see a deduction of their government pension, as used to be the case.
Nationalist MP Michael Asciak said the Bill reflected the way how the government planned ahead, while the Labour Party continued to miss the wood for the trees and was not looking at the bigger picture.
He said that although the state should assist the people, it was not just the state that was responsible for the well-being of individuals. Everyone had to shoulder responsibility.
The government, for example, was committed to providing health care free of charge, but if one felt that one could do better than the basic minimum provided by the state, and invest in insurance or private health care system, that was one's right and responsibility to invest.
The Bill would correct a pensions system introduced by a Labour government. Although the idea of a minimum guaranteed pension had been a good one, the Labour government had absconded from leaving space to individuals to improve their position.
The existing system was therefore a handicap on the elderly, who wanted to be sure of an adequate pension for the rest of their lives. Furthermore, it had not been possible for one to keep on working once one received a pension. With this law, once one retired one would be able to continue working without paying social security contributions.
Dr Asciak said it would be irresponsible for the government not to cajole people into being more savings-inclined in the best interests of their future.
The lifting of the capping of the national pensionable income, as provided in this Bill, was a sign of the times and would change a situation which, unless corrected, would make life difficult for many people.
The Bill would also reward those who were responsible and saved for their pensions or invested in life insurance. It would also protect people who studied longer and women who stopped working temporarily to care for their children, Dr Asciak said.
Parliamentary Secretary Edwin Vassallo said this Bill was far from hasty, as the opposition had said. Nor did it lack consultation. It had been on the drawing board for 10 years and included an extensive consultation process that included a White Paper and a range of impact assessments which had been published. In contrast, the opposition had published no detailed documentation to back its arguments.
Mr Vassallo said workings presented by Labour MP Karl Chircop were defective. According to Dr Chircop, a worker earning Lm75 had a pension of Lm3,640. This was not the case. A worker earning Lm75 had a pension of Lm2,600. A worker earning Lm93 had a pension of Lm3,203 and not of Lm4,263 as had been claimed by Dr Chircop, and a worker earning Lm124 had a pension of Lm4,298 and not of Lm4,500, as claimed by Dr Chircop.
Besides, government revenue from national insurance was not used just to fund pensions but also contributed to some of the outlay on other social services.
This Bill, he said, sought to instil greater justice in the level of pension one received compared to the salary one used to have and the social security contributions one paid. Still, low income earners would be protected so that they too would have an adequate pension.
The Bill removed the distinction between employees and the self-employed in the computation of pensions, improved the situation of parents who currently missed social security contributions when they stopped working to have children, and it also sought to reduce the possibility of abuse by changing the computation of social security contributions for pension eligibility.
The Bill left open the possibility of workers retiring at 61, provided they would have made sufficient social security contributions.
Parliamentary Secretary Helen D'Amato said everyone, other than the MLP, agreed that pension reform could no longer be postponed if the change was to be gradual so that the impact on people's lives would be minimal. The government's goal was not to be popular in the short term, but credible in the long term. The secret was to achieve a balance between contributors and pensioners, with adequacy and sustainability.
Focusing on care for the elderly, Mrs D'Amato said the pensions reform was not being launched at the expense of care for the elderly. In the latter sector Malta was a shining example for other much larger countries. In the next few days a number of long-time inmates would be allowed out of Mount Carmel Hospital to live more independently in two hostels. Step-down facilities were also being made available for long-time elderly inmates of St Luke's Hospital. Many projects for the benefit of elderly and cancer patients were in the pipeline, including a new Home for the Elderly at Mellieha and new facilities at St Vincent de Paul Home, giving the lie to the opposition's slighting statements on the government's efforts for the aged. This sector of society was the greatest beneficiary of the cost of health care.
Mrs D'Amato said the main aim of any pensions reform was to ensure adequate funds in the hands of senior citizens. But it was simplistic to calculate the sustainability of the current pensions system on the revenue from and spending of NI contributions, which were channelled into much more than pensions.
Michael Gonzi (PN) said Labour shied away from hot subjects while the PN confronted them. It was interesting that only a few days ago Parliament had been debating education, which was the future of children, while now it was debating pensions reform, which also impacted on the future of children as well as their parents.
Every country in Europe was concerned about the sustainability of its pensions system, but Labour was saying this was not the case in Malta. Clearly, though, if the problem was not tackled now it would constitute a hard blow for Malta in the not-so-distant future and impact on competitiveness.
Over the past years the country had seen a silent revolution. It was dubious whether Labour, once returned to power, would have the courage to touch any of the provisions of the pensions reform.
Joseph Cassar (PN) said it was unfortunate that Labour could be found nowhere in the list of bodies that had contributed to the Pensions Working Group's final report, which was a commendable piece of work. This made it all the more incomprehensible how Labour had, at the last minute, come out with a document which effectively threw nationwide efforts for pension reform out of the window.
Dr Cassar asked why the House should not be debating the reform following such widespread consultation, and have to wait until 2009. Had Labour forgotten that it had already said that the pensions system would no longer be sustainable after 2010? Did that mean that Labour would restart the studies only a year before?
All sectors in Malta should be pulling the same rope. Even in surgery, the risks of emergency surgery were far greater than those of elective surgery. To listen to Labour and wait would be tantamount to emergency surgery on the pensions system. Labour was only mocking what it knew to be true.
The government was certainly not proposing the pensions reform with a view to winning votes. This went to show yet again that Nationalist governments had always been courageous in their decisions. The second pillar of the reform, which had also been recommended in 1996 and 1998, would be launched when the time was right.
Opposition remarks are being reported separately.