Malta's pension situation is considered by consultancy company AON as being at risk because of demographic pressures and because of the penetration and scope of private pensions.
In AON Consulting's third annual survey on pensions, Malta was put in 19th place out of the 25 EU member states considered in 2007, up from 21st in 2006. (Romania and Bulgaria were not included because of the lack of comparable data).
Malta ranked 6th in terms of the affordability and sustainability of its pension but only 24th in terms of private pensions.
It placed 17th in terms of demographics and 12th in terms of the adequacy of its state pension (see table).
AON Consulting said that pensions remained a key issue across Europe with pension reforms making their slow but steady progress across the continent. It noted that the analysis was objective and only reflected pension reforms in so far as they impacted on the statistics being produced.
"As reforms come into effect, the impact on the measures used can be slow. However, the mix of current and projected measures aims to ensure that sufficient weight is given to such change programmes," the report noted.
The report highlighted some of the factors putting pressure on pension systems.
Between 2006 and 2007, the European population growth slowed from 0.165 per cent to 0.149 per cent according to the data collected for the European Pensions Barometer.
The main change was a higher rate of deaths in 2007 than in 2006, reflecting a population that is continuing to age.
For the first time since the barometer's inception, the rate of deaths in 2007 (10.36 per 1,000 population) was higher than the rate of births (10.3) and positive population growth only exists due to continued immigration to Europe.
Reflecting the aging population and the challenges that economies face, pension reform continues to be popular across Europe, the report noted.
"Most reforms do not impact on the short-term cost of state pensions but are reflected in future, forecasted costs. For example, between 2006 and 2007 the average projected spend across Europe reduced marginally from 13.3 per cent of Gross Domestic Product to 13.2 per cent of GDP and we would expect this to continue to fall gradually as reforms are implemented. However, this is still substantially higher than the current average of 9.6 per cent," it said.
"As state schemes cut back, private schemes take up the slack. Between 2006 and 2007, the average workforce participation rate in private schemes increased from 40.2 per cent to 41.9 per cent.
Ten countries revised the estimates of pensions participation upwards while only one country, Cyprus, revised its estimate downwards. As various forms of compulsory participation become more popular across Europe, this trend is likely to continue.
"Finally, the average retirement age across Europe also increased in the last year, from 60.5 to 61.0. This is a substantial change over a single year and is unlikely to represent a long-term trend of that magnitude.
If this trend did continue then it would mean that, on average, every year that someone worked they would only get half a year closer to their retirement age."
The 2005 Turner Report on the future of UK pensions concluded that the aging population left the UK with four choices: lower pensions, higher retirement ages, higher member contributions or higher taxes. Assuming that the first is unacceptable, some combination of the latter three must be arranged, the report noted.
"As our report will show, with a combination of increases in pension costs as a percentage of GDP (to be funded by taxes), private pensions coverage (and hence higher contributions) and the average retirement age, this is precisely what Europe is already seeing and, with continued reforms, will continue to see."
AON said that the best performer was Sweden, which moved up five places to the top three. Luxembourg and Austria also saw major improvements due to better participation rates in company pensions, among other things. Denmark kept its top ranking for the second year running but Italy dropped to the bottom of the table, due to a substantial worsening of demographics, a decline in population growth and projections for the old-age dependency ratio increasing yet further.
Some of the largest falls were registered by Estonia, Cyprus and Portugal, which has fallen from first place in 2005 to 20th last year.
In AON Consulting's third annual survey on pensions, Malta was put in 19th place out of the 25 EU member states considered in 2007, up from 21st in 2006. (Romania and Bulgaria were not included because of the lack of comparable data).
Malta ranked 6th in terms of the affordability and sustainability of its pension but only 24th in terms of private pensions.
It placed 17th in terms of demographics and 12th in terms of the adequacy of its state pension (see table).
AON Consulting said that pensions remained a key issue across Europe with pension reforms making their slow but steady progress across the continent. It noted that the analysis was objective and only reflected pension reforms in so far as they impacted on the statistics being produced.
"As reforms come into effect, the impact on the measures used can be slow. However, the mix of current and projected measures aims to ensure that sufficient weight is given to such change programmes," the report noted.
The report highlighted some of the factors putting pressure on pension systems.
Between 2006 and 2007, the European population growth slowed from 0.165 per cent to 0.149 per cent according to the data collected for the European Pensions Barometer.
The main change was a higher rate of deaths in 2007 than in 2006, reflecting a population that is continuing to age.
For the first time since the barometer's inception, the rate of deaths in 2007 (10.36 per 1,000 population) was higher than the rate of births (10.3) and positive population growth only exists due to continued immigration to Europe.
Reflecting the aging population and the challenges that economies face, pension reform continues to be popular across Europe, the report noted.
"Most reforms do not impact on the short-term cost of state pensions but are reflected in future, forecasted costs. For example, between 2006 and 2007 the average projected spend across Europe reduced marginally from 13.3 per cent of Gross Domestic Product to 13.2 per cent of GDP and we would expect this to continue to fall gradually as reforms are implemented. However, this is still substantially higher than the current average of 9.6 per cent," it said.
"As state schemes cut back, private schemes take up the slack. Between 2006 and 2007, the average workforce participation rate in private schemes increased from 40.2 per cent to 41.9 per cent.
Ten countries revised the estimates of pensions participation upwards while only one country, Cyprus, revised its estimate downwards. As various forms of compulsory participation become more popular across Europe, this trend is likely to continue.
"Finally, the average retirement age across Europe also increased in the last year, from 60.5 to 61.0. This is a substantial change over a single year and is unlikely to represent a long-term trend of that magnitude.
If this trend did continue then it would mean that, on average, every year that someone worked they would only get half a year closer to their retirement age."
The 2005 Turner Report on the future of UK pensions concluded that the aging population left the UK with four choices: lower pensions, higher retirement ages, higher member contributions or higher taxes. Assuming that the first is unacceptable, some combination of the latter three must be arranged, the report noted.
"As our report will show, with a combination of increases in pension costs as a percentage of GDP (to be funded by taxes), private pensions coverage (and hence higher contributions) and the average retirement age, this is precisely what Europe is already seeing and, with continued reforms, will continue to see."
AON said that the best performer was Sweden, which moved up five places to the top three. Luxembourg and Austria also saw major improvements due to better participation rates in company pensions, among other things. Denmark kept its top ranking for the second year running but Italy dropped to the bottom of the table, due to a substantial worsening of demographics, a decline in population growth and projections for the old-age dependency ratio increasing yet further.
Some of the largest falls were registered by Estonia, Cyprus and Portugal, which has fallen from first place in 2005 to 20th last year.