Pension cuts in best of times - Michael Briguglio
A few weeks ago, Prime Minister Joseph Muscat warned that if Malta does not want more foreigners it can say goodbye to pensions. He added that if Malta had to go to back to its previous situation, it would not be able to pay for pensions and would have to increase the burden on the taxpayer.
There were negative reactions to this statement from all quarters: the Opposition, civil society and the media. Writing in the Times of Malta (February 11), Carmel Mallia, president of the Alliance of Pensioners Organisations, said pensioners’ organisations are “very much hurt and concerned by this statement because, once again, pensioners are the scapegoats of the prevailing social and economic situation”.
He added that, in the last five years, “pensioners got poorer and poorer as prices of goods, services, rent, health etc. went sky-high”. He reminded his readers that, according to Eurostat, one out of four pensioners in Malta is officially at risk of poverty in spite of the island’s economic boom.
Finally, he invited the Prime Minister “to be transparent on the prevailing situation and declare that his example referring to pensions should never be considered as a threat to pensions and pensioners”.
Official figures in terms of the Social Security Act can provide some valuable information. If one looks at the most recent figures, published on March 29, 2018 in The Malta Government Gazette, one finds that funds through social security contributions and the direct contribution of the State amount to €875,053,633. Total expenditure for pensions under the contributory schemes amounts to €749,667,709, thus indicating a surplus between contributions and expenditure on pensions. It is when administration expenses (€8,132,555) and health recurrent services (€670,074,218) are deducted that a welfare gap of €544,688,294 results.
These figures show that if the government used contributions for pensions, there would not be a pensions deficit. So, it is not fair to blame pensioners for the current pensions issue.
If the government used contributions for pensions, there would not be a pensions deficit
Indeed, as some have been writing during past years, Malta’s legislation (The Social Security Act, Cap. 318) does not authorise the charging of health recurrent services to social security. Sure, Malta has a national consensus to finance such expenditure from State funds but why should revenue earmarked for pensions finance this?
In this regard, back in 1979, then prime minister Dom Mintoff removed the National Insurance Fund and all social security contributions by employers, employees and the government were included in Malta’s Consolidated Fund, where they could be used for other expenses. Besides, Mintoff’s reforms also meant that the new ‘two-thirds’ pensions were capped despite one’s contributions and that part of the government’s expenditure was paid by those who were entitled to a pension from former employers, as is the case with service pensioners who were denied a portion of their State pension to which both they and their employers had contributed.
Pre-1979, former civil servants receive this national insurance pension together with a service pension from the Treasury. The real value of the latter keeps decreasing every year. Pensioners in this situation have been paying national insurance in full for over 40 years but they only receive a pittance in return. They have been co-financing other pensions through their contributions, so why are they being denied what is theirs by right?
Let us also keep in mind that, as Albert Cilia-Vincenti, president of the National Association of Service Pensioners, remarked in the Times of Malta (January 28), Malta’s government also “deducts the Malta contributory social security pension of those who also receive a service pension from another EU country”. A few weeks ago, I wrote to Social Solidarity Minister Michael Falzon about this but, to date, no reply has been forthcoming.
My feeling is that the government is coldly calculating that this demograph is decreasing and will, thus, progressively lose its electoral impact. To the contrary, we should show cross-generational solidarity and ensure that pensioners live in dignity.
This is a Times of Malta print opinion piece