Michael Falzon, Minister for the Family, Children’s Rights and Social Solidarity.
The question in itself confirms the widespread belief that the country is in a sound economic position to actually strengthen pensions. And that is precisely what our progressive government has been doing.
Just five and a half years ago, under financial deficits of previous administrations, pensioners considered themselves lucky when simply receiving the full cost-of-living adjustment (COLA). Because that, too, was not always guaranteed. Back then, the elderly faced constantly rising burdens, with no adequate assistance, causing evident hardships to many families.
In 2013, a new Labour government rolled up its sleeves and set economic growth as its absolute priority. As social-democratic politicians, we believe that the creation of unprecedented wealth through investment is fundamental to fairly distribute more prosperity.
Results speak for themselves. For four consecutive years, pensioners have been given effective increases, over and above COLA, which concretely translate into a deserved better quality of life.
This government has implemented better pensions for persons who remain in employment despite reaching retirement age. For instance, those working till 65 years of age started benefitting from an additional increase of up to 23 per cent. Widows, with a pension on their behalf, started receiving full spouse’s pension, instead of a reduced one, gaining an increase of over 15 per cent.
For four consecutive years, pensioners have been given effective increases, over and above COLA, which concretely translate into a deserved better quality of life
A bonus was introduced to assist people who had not paid enough contributions to qualify for a pension. And the right was given to persons to pay the lack of contributions before retiring.
Yet, the most significant social revolution was the strengthening of the minimum and age pension which, over four years, will be representing over a €20 increase every week for those with lowest income. Budget 2019 alone will be voting €21 million to provide further success to 92,000 pensioners, apart from other targeted measures.
A married couple will see its pension rising from €8,744 in 2015 to €9,791 next year. A widow who had a pension of €6,393 will get €8,743 next year, an increase of €45 every week.
Incredibly enough, Adrian Delia claims these improvements are ‘pittance’. How can he be real? The Nationalist Party must keep in mind that while it raised the pension age, this government has increased the pension rates.
I have not here mentioned the announced tax exemptions for all pensioners and the issuing of bonds for pensioners with favourable interest rates.
The quality of life of pensioners has also been heavily improved through the reduction in energy bills, the elimination of out-of-stock medicines, the compensation for past cases of injustice, and more.
Such measures have reduced the number of families in severe material deprivation from 10.2 per cent in 2012 to 3.3 per cent in 2017.
That is the very reason why my colleagues and I are in politics. By giving better standards of living to all families and children, we are ensuring that Malta continues to be a living success.
Godfrey Farrugia, Leader of the Democratic Party
In 1979, a major reform in social security contributory pensions was undertaken. Maltese pensions were pegged to be two-thirds of one’s salary capped to a maximum that does not exceed the pension of the President of the Republic.
After 25 years, this scheme was revisited by the World Bank. Projections had shown that on its own this scheme was grossly inadequate. Pensions had not only drastically decreased when compared to rises in salaries, but future pensions were to be unliveable. Moreover recent Maltese household studies indicate that future generations are going to be less wealthy.
Reforms were undertaken in 2004 and in 2010 and in 2015 a Strategy for an Adequate and Sustainable Maltese Pension System was published. Since then, pensioners are being given the full COLA annual budgetary rise, third pillar pensions were introduced, incentives for pensioners to work up to 65 years were granted, and a full pension for widows was secured. Tied with them were measures to reduce early invalidity employment retirement and to increase female employment. An adequate liveable pension is one that should bridge the quality of life at retirement to be as close to that enjoyed when a person was employed. This has not been achieved. The government has embarked on a step-up approach by cherry picking certain measures but not others.
It is opportune that we act timely. Our budgets need to target a more rapid and urgent reforming process
It is evident that the state of affairs is not only dictated by the population demography but also influenced by society’s behavioural attitudes such as mortgages and rainy day savings. In this respect, the PD notes that the voluntary private pensions (third pillar pensions) have had a poor uptake and on its own is not a plausible solution. To address this inadequacy, the PD is of the opinion that:
First and foremost, the pension system must be backed by a sustainable financial strategy that guarantees it for a minimum interval period of 30 years. This would protect the capacity of the pension scheme to effectively deliver tangible outcomes;
Employers should be obliged to enrol all their employees, but also offer a choice to opt out by being offered an active role to participate in government-induced fiscal incentive schemes outside the present system;
All pensioners should always be in receipt of a decent living pension. A defined national minimum pension must be guaranteed with defined timeframes, which should be out of reach of the minister’s discretion.
The PD is of the opinion that approaches to solve the present impasse may include:
1) Statuary pensions: these should not be capped but should be proportional to the paid National Insurance Contributions income over the years. A fair balance between contributions and benefits must be defended.
2) Second pillar pensions: these should be open to all Maltese citizens and not be exclusive to members of Parliament.
3) Option rights to employees: a right to opt out in the present automatic enrolment of the pension scheme may be offered as long as a third pillar option is taken. Employees may also be given the option to pay a higher national contribution up to a threshold.
4) An education campaign: this should target vulnerable groups, such as those who are unemployed, divorced, chronically ill, disabled or who have recurrent debts or unpaid bank loans.
The Democratic Party notes that the pension system has been in the spotlight for some time. The 2015 technical report has recommended a number of priorities. It is opportune that we act timely. Our budgets need to target a more rapid and urgent reforming process. In the meantime, there are a number of persons who, on retiring, are poorer than their counterparts who retired in earlier years.
The Nationalist Party did not send in its contribution.
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This is a Times of Malta print opinion piece