In his contribution on the 2018 pension adequacy report published by the European Commission, Michael Briguglio (May 21) argues that “the adequacy report notes that the relative incomes of older people have been experiencing negative trends in the period under review (2008-2016)”.
This statement gives the impression that official statistics indicate that the relative income of older people in 2016 has fallen significantly below its levels in 2008. However the same report quoted by Briguglio indicates that in 2016 the relative median income of those aged 65 and over amounted to 72 per cent of the relative median income of persons aged under 65, practically unchanged from the 73 per cent ratio observed in 2008.
Moreover, it is important to note that the fact that the relative income ratio remained virtually unchanged does not imply that the income of older people fell during this period. In fact, Eurostat data show that whereas the median equivalised net income of persons aged 65 and over in 2008 amounted to €7,608, by 2016 it had risen to €10,411. This constitutes an increase of over €2,800 in just eight years, or an annual average increase of four per cent.
During the same period the Retail Price Index, which is the official measure of inflation that is monitored every month by the social partners, rose by an average of 1.5 per cent each year. This means that contrary to what Briguglio claims, the increase in the median income of older people did not fall below the rise in prices.
Official statistics suggest that during this period there was an increase in the purchasing power of older people, boosted also by the reduction in energy tariffs since 2014 and several social measures targeting pensioners and the elderly in general.
For instance, while the Caritas report issued in 2012 had calculated that a pensioner couple needed to spend €525 on electricity and water bills, the report issued by Caritas in 2016 noted that this cost had fallen to €206. The same report had noted that following the increase in the minimum pension, the income of an elderly couple, at €8,807 was above the minimum income of €6,527 required for decent living.
Malta was one of only 10 countries in the EU to raise its minimum pension, while it has given significant tax advantages to pensioners
Briguglio claims that “the at-risk-of-poverty or social exclusion rate for older people has increased, especially for those aged 75 and over”. In reality, Table 5 in page 178 of the same European Commission report that Briguglio quotes indicates that between 2008 and 2016, the at-risk-of-poverty rate or social exclusion for those aged 75 and over declined by 2.2 percentage points. As for those aged 65 and over the ratio was virtually unchanged, at 26.1 per cent in 2016 as against 26 per cent in 2008.
The 2018 pensions adequacy report states that “the impact of the reforms initiated in 2014, and the subsequent refinements thereafter, on the labour market has been quite positive”, while also noting that “those at the bottom, who receive the lowest pensions generally through thenon-contributory system, have improved, some substantially”.
In its statistical table, the report also notes that between 2014 and 2016 there was a drop of 11.5 per cent in the proportion of the population aged 65 and over who are materially and socially deprived. The report notes that Malta was one of only 10 countries in the EU to raise its minimum pension, while it has given significant tax advantages to pensioners so that they do not pay tax on their pension income.
The report emphasises that a major issue for current pension adequacy is the fact that female participation in the labour market was very low, resulting in low pension entitlements. Efforts in recent years to raise female participation will help to address this.
In fact, Malta’s aggregate replacement ratio – the comparison between the average pension of those just retired with the average wage of those just below the pension age – has improved considerably. While in 2008, the median pension of someone aged between 65 and 74 amounted to 41 per cent of the average wage of someone aged between 50 and 59 years, in 2016 this had risen to 54 per cent.
In conclusion, the process started with the 2014 reforms has already started to give positive results, with a substantial decline in material and social deprivation and a decline in the risk of poverty and social exclusion for those aged 75.
The improvement in the sustainability of the pension system and of government finances provides the scope for further efforts to continue improving adequacy and combating the risk of poverty and social exclusion.
Because for this government, poverty is not a perception.
Claudia Cuschieri is spokeswoman, Ministry for the Family, Children’s Rights and Social Solidarity.