The adequacy and sustainability of a national pension is an issue that understandably stimulates public debate in the context of a population that is fast growing older.
Various reforms have been introduced since 1979, when the two-thirds pension was launched. The law provided for a ceiling/capping which should not be exceeded.
Today many fret about whether the national pension is adequate. The reforms of the past two decades have not addressed the weaknesses in the Social Security Act, and some argue that new injustices have been ingrained in the system.
MEP candidate Arnold Cassola, writing in Times of Malta, has argued that “the Ministry of Social Policy intends freezing the pensions of the 92,000 pre-1962 born pensioners to keep it at the present rates”. He added that pre-1962 born pensioners would get €350 a month less than those born post-1962.
Minister for Social Policy Michael Falzon attempted to rebut Cassola’s claim adding that: “The 2023 Budget awarded all pensioners, irrespective of their birth year, an increase of €650 yearly.” Falzon did not deny that present legislation set a higher maximum pension limit for those pensioners born post-1962. He implied that the balance is restored if one considers that the pre-1962 cohort will enjoy a higher tax exemption than those born post-1962, and that the latter have to satisfy more onerous contributions to qualify for a maximum pension.
Carmel Mallia, the president of the National Association of Pensioners, confirmed the pensions regulation anomaly that treats two cohorts of pensioners differently. Mallia argues that the 2006 pensions reform was meant to ensure the pension system’s sustainability and adequacy, adding “the measures taken to address sustainability were fruitful whereas the adequacy dimension was not addressed.”
No pension reform is without pain. An unfunded national insurance system that in part caters for the payment of a national pension is not sustainable unless contribution rates are revised regularly to ensure that its revenue is sufficient for adequate pensions.
For too long, tough decisions have been postponed with the result that making the necessary reforms could not be more unpopular.
The pensions reform team, for instance, had urged the government to introduce a pillar of reforms that would make saving for a personal pension fund mandatory.
Falzon waxed lyrical about the improvements in social services made by the Labour administration in the last 10 years. But he did not deny that pensioners who depend on the state pension face formidable financial challenges.
The onset of high inflation in the last two years has meant that pensioners who suffer from financial insecurity, irrespective of their date of birth, face the risk of poverty, malnutrition and consequent poor health.
Mallia correctly remarks “it is pertinent to ask why MPs of both political parties and trade unions prefer to remain silent about this very important issue which is a threat to the well-being of pensioners”. Both political parties have the habit of sitting on the fence when controversial issues threaten a loss of voter popularity. The time will come when the “grey brigade” of older adults demand that their representatives in parliament act to promote pensioners’ interests.
The discrimination caused by the different pension ceilings of those born before or after 1962 is morally unjustified. All pensioners today have to face the same challenges of advancing old age. Some will be better prepared to cope because they enjoy adequate financial security. Others will continue to struggle as their state pension proves increasingly inadequate to cater for their basic needs.
It is about time that all pensioners are treated with dignity.