Soon-to-be retirees will have their 2020 pension contributions calculated according to the income they made in the two months before the pandemic broke out in March of last year.
Workers born between 1956 and 1961 who made less income throughout last year due to the pandemic will have that year’s contribution calculated based on their earnings in January and February 2020, the government said on Tuesday.
Speaking at a press conference, social solidarity minister Michael Falzon said that the measure is estimated to affect anywhere between 2,000 to 2,500 people.
“This measure ensures that people do not earn less pension when they retire because of circumstances which were beyond their control,” Falzon stated.
Finance Minister Clyde Caruana added that the measure would also affect anyone planning on retiring within the next 20 years.
Caruana added that the government had done all it could to safeguard jobs during the pandemic and did not want pensioners to be left without an adequate income.
“For example, if someone was set to earn €8,000 per year, a loss of income due to the pandemic’s effects last year might negatively affect that person’s total contributions and lower it to €7,000,” Caruana explained.
“With this measure, we review each case and instead calculate the contribution from that person over the last year based on what they earned in January and February of last year,” he added.
The measure will also apply to self-employed individuals, too, with their 2020 contributions based on income they made in 2019.
Reluctance to raise minimum wage
Taking questions after the press conference, Caruana reiterated his stance on the minimum wage, arguing that wages need to be increased in a sustainable way.
“Currently, business owners might not be able to take a sudden increase in wages, and I don’t want to raise the minimum wage only to end up with those same workers losing their jobs because the business they work for had to close or fire them,” Caruana said.
Clyde Caruana and Michael Falzon announce the pensions calculation change. Photo: Mark Zammit Cordina“We want to ensure that everyone benefits, and if we just increase the minimum wage suddenly and prematurely then the negative effects will outweigh the positive ones,” the finance minister added.
“However, I do want to see that the next nine months of discussions and consultations eventually lead to higher wages in our country,” Caruana stated.
Malta is among a group of countries resisting EU Commission efforts to introduce laws requiring member states to have minimum wages set to at least 50 per cent of the country's average wage and 60 per of median wages.
When asked why it was adopting this position, Caruana said he believed Malta’s labour market does not permit this.
“The structure of wages in our system is not the same as in other EU member states,” the minister said.
“If we increase the minimum wage by say 10 per cent, then the employer will also expect a 10 per cent raise in productivity. If we do not upskill our minimum-wage workforce accordingly, then employers will end up losing money,” he added.