The employers' association has urged the government to consult the business community thoroughly before considering any changes to the pension system.
The Malta Employers' Association cautioned that a second pillar pension system, which the Prime Minister recently said was being explored, would add costs to employers at a critical time when many companies were struggling with the effects of the global financial meltdown and the hike in electricity tariffs.
The MEA said the burden would be particularly felt by small and medium enterprises.
The statement comes after the EU urged the government to introduce reforms in the pension and health sectors with "urgency" after a study found Malta's finances to be unsustainable in the long term.
The Prime Minister reacted to the study saying the government was reviewing the so called second pillar pension, which is a private retirement scheme funded by employers and employees to supplement the state pension.
The MEA said the study should look into the impact the system would have on the purchasing power of employees.
It pointed out that the country's culture had to be taken into consideration when considering such changes to the pension system. For instance, many Maltese would rather invest in a second property rather than in financial schemes, the MEA said, stressing that it would be wrong to assume that, in the absence of second pillar pensions, people were not providing for their future standard of living.
According to the annual publication on the state of public finances in the Economic and Monetary Union, Malta seems to be coping with EU targets in the short and medium term, however, the situation is not deemed sustainable in the long term, especially when the growth in expenditure on health and pensions is factored in.
After over 10 years of discussion, in 2006 the government had started a gradual overhaul of the pension system. The first phase, known as the first pillar, saw the retirement age raised from 61 to 65 years along with the regular contribution to the state pension from 30 to 40 years.
The second phase, or second pillar, would see both employers and employees contributing towards private pensions over and above the national insurance payments.
When the reform was launched, the government bound itself to a review of the system every five years, taking evolving circumstances into account. The first review is scheduled to be presented to Parliament by this December 31.