A proposal to ‘invest’ part of salary increases into government bonds which would mature after retirement was yesterday floated by Employment Minister Evarist Bartolo as a possible solution to address pension sustainability.
The idea was put forward during a debate held as part of a two-day seminar organised by the UĦM Voice of the Workers on the EU pillar of social rights.
Mr Bartolo noted that in 20 years’ time, the entire system might collapse, as there would be only two workers sustaining each pensioner, which was half the present number.
On the other hand, he stressed that the problem had to be tackled with an open mind and a greater degree of flexibility.
“This is why we need to look beyond issues dealing with social security contributions like demographic and immigration policies,” he said.
Mr Bartolo elaborated further, saying a number of countries, which he did not mention, had started to address long-term sustainability through specific measures in collective agreements
“Should not unions, public and private employers consider including, something like government bonds that would mature at pensionable age?” he asked.
Issue must be tackled through long-term policies
“This could work out by deferring part of a salary increase to a later stage, and thus help to start changing the mentality in favour of saving for a rainy day.”
During the debate he also called for an agreement at the EU level to establish an “intelligent, hu-mane immigration policy” which would also contribute to sustaining welfare systems.
Employment Shadow Minister Therese Comodini Cachia insisted that the sustainability of pensions was not something which could be addressed in isolation, but was part of a much wider approach.
She noted the issue must be tackled through long-term policies rather than what she described as the “election culture” based on a five-year cycle.
The issue of second-pillar and occupational pensions was also on the agenda, particularly in the wake of the government’s stance that their introduction at this stage would dent the country’s competitiveness.
Both David Spiteri Gingell and Philip Von Brockdorff, two pension experts, called for greater efforts to introduce voluntary second-pillar pensions.
Mr Spiteri Gingell noted that the 2015 pensions’ strategy group, which he was part of, had recommended discussing “automatic enrolment pensions”.
The system is based on the concept that new entrants into the labour market are enrolled by default into an occupational private pension, with the possibility to opt-out.
“This has been extremely successful outside the EU, as was the case for the KiwiSaver scheme in New Zealand,” he noted.
Prof. Von Brockdorff said the government was sending mixed messages. While on one hand it was advocating work-based pensions in the Budget, there were instances when it was stating that they had to be mandatory.
“We can set the ball rolling on voluntary second-pillar pensions through collective bargaining, as this will start persuading workers and employers of the benefits of such schemes,” he said.