Plans to introduce job-related pension schemes have been welcomed by the Union Ħaddiema Magħqudin but greeted with scepticism by the Malta Employers’ Association.
Josef Vella, UĦM chief executive, described the plans as a welcome first step.
He said the proposal “opened the door ajar” at a time when everyone apart from his union argued against on-the-job retirement schemes for workers.
“It is still a long road ahead but we do not have to reinvent the wheel because there are models we can copy from abroad,” Mr Vella said.
I believe the State has to be paternalistic to avoid having people in old age without an adequate pension- Josef Vella, Union Ħaddiema Magħqudin
Last week, Finance Minister Edward Scicluna told a meeting of the social partners and MEUSAC representatives that the government planned to introduce work-related pensions on a voluntary basis by offering employers incentives for such schemes.
But employers’ association director general Joe Farrugia said he could not understand what incentives would compensate employers for paying out pensions to employees long after they retire.
He said the MEA disagreed with work-related retirement schemes, known as second pillar pensions. “We believe greater emphasis should be made to strengthen State pensions and more incentives given for individuals to take out private pension schemes.”
Mr Farrugia said the minister’s announcement raised more questions than answers, insisting it was not clear whether the voluntary aspect applied to both employers and employees.
“Could this lead to a situation where not all employees in a company choose to join a scheme, putting a greater administrative burden on their employer?”
Mr Farrugia said another important issue that had to be addressed was pension portability when employees changed jobs. Within the parameters of a voluntary system it may prove difficult to ensure portability if the employee joins a company that has no pension scheme.
We believe greater emphasis should be made to strengthen State pensions- Joe Farrugia, Malta Employers’ Association
A proposal for second pillar pensions to become mandatory had been made by the Pensions Working Group in 2004. This required employers and employees to contribute towards a private pension.
However, there was broad consensus over the years against their introduction. Both the current and previous administrations were against mandatory schemes, although the Nationalist Party last year did not dismiss them outright.
As yet, details are sparse and the government will be setting up a working group to come up with a blueprint.
But Mr Vella was more hopeful, insisting this had to be viewed in the context of a Central Bank report that showed how the culture of saving no longer existed.
“This is the future of our children we are talking about, and in circumstances like this I believe the State has to be paternalistic to avoid having people in old age without an adequate pension,” he said, adding the voluntary aspect should apply to employers only.
He admitted it would be a challenge finding employers ready to take on board such schemes if they remained on a voluntary basis but insisted doing nothing was not an option.
“We will negotiate with employers when revising collective agreements but the UĦM will also produce its own report on second pillar pensions to take the discussion forward,” Mr Vella said.
kurt.sansone@timesofmalta.com