A rise in pension over and above the annual cost-of-living allowance, just announced in the Budget for 2019, is most welcome by the thousands of pensioners struggling to make ends meet, but does it meet their expectations? Are the amounts paid in pension today adequate to meet the rising cost of living and the recurrent costs of having, in a household, items no longer considered a luxury?

Considering all the pre-Budget hype about how the government intended seeing to the pensioners’ plight, most would probably feel the provisions announced by the Finance Minister do not go far enough to meet their expectations. However, although the increase does not match their needs, others may feel it is, at least, a positive first step in the exercise to raise pensions to a more reasonable level. The problem is the exercise is taking far too long.

To make matters worse, with the plunge in interest rates, pensioners who had been wise enough during the time they had been in employment to save for their retirement have seen their income from their investments dwindle heavily. This has greatly affected their living standard and brought out in greater perspective the huge gaps in income between different segments of the community.

Equally – if not more – disquieting is the news that three in five people are concerned they would not have an adequate income when they reach retiring age. It is not only women who are worried about this. According to an EU survey on social insecurities, 57 per cent of male respondents to the research admitted they too were worried about their income in future.

One problem that needs to be tackled here is the rising number of young people who, unlike the older generation, do not have the habit to save for their retirement. They may perhaps believe that their contributory pension will be enough for them to go by when their time comes to retire. They are generally wrong.

There would need to be greater education on the importance for young people to provide for the time they retire from work. They should also be encouraged to take out another pension in addition to the one they are entitled to under the compulsory contributory scheme. Even if interest rates are down, it is always wise to save for a rainy day.

Since Malta is still marking time on the introduction of a second-pillar pension, the government is offering fiscal incentives to those wishing to invest in private pension schemes. Last year, the government took measures to encourage the setting upof voluntary occupational pension schemes. Contributions paid into such schemes by employers and employees were to be put in tax-free expense accounts. Have there been any such schemes since the government announced the incentives?

But to go back to the contributory pension, the calls over the need to ensure adequacy of the pension rate is bound to pick up even further as the disparity in income grows in the wake of greater economic growth. Pension experts say that to improve the income security of pensioners in the long term, pensions should be increased on a formula that reflects 50 per cent wage inflation and 50 per cent retail price inflation.

What is ultimately essential, however, is to ensure the contributory scheme is sustainable.

This is a Times of Malta print editorial