Prime Minister Robert Abela again repeated the myth coined by his predecessor Joseph Muscat that the Nationalist Party in government had frozen pensions. It was the Labour government of Dom Mintoff and Karmenu Mifsud Bonnici which, between December 1981 and May 1987, froze not only pensions but also wages.
In these days, just after celebrating Woman’s Day, it’s also good to remember that at the same time as pensions and wages were frozen so were woman’s jobs – the Labour administration decided that a job vacated by a man could not be taken over by a woman!
When it comes to pensions, the Nationalist Party in government can boast that, between 1987 and 2012, pensions increased much more than the cost of living. Per capita, pensions went up from €2,318 in 1987 to €6,591 in 2012 – an increase of €4,272 or 184 per cent.
At the same time, the rate of inflation stood at 86.2 per cent. This means that pensions increased by more than twice the cost of living, thus giving pensioners more money to spend.
Between 2013 and 2022, per capita pensions increased from €6,707 to €9,138, that is by €2,430 or 36.2 per cent.
The prime minister was also reported as saying that in 2006, the PN in government decided to reform pensions “creating discrimination and injustice between pensioners born before 1962 and those born after”.
“We’ll fix that ourselves,” he added.
When in the 1970s, the Labour government introduced the two-thirds pension, done at the expense of service pensions and retirement pensions, the National Insurance Fund was abolished and receipts from National Insurance Contributions formed part of the general government revenue, instead of going into a fund where they could be invested and thus earn capital to pay for pensions.
As early as the late 1990s, the International Monetary Fund insisted that the Maltese government reform the pension scheme as it was no longer viable. During the short Labour administration of 1996/1998, the then minister of finance went on record declaring that if nothing was done about the pension scheme, Malta would have a pension crisis before 2010.
The Nationalist administration took this problem very seriously. Following three years of consultations and meetings with 49 organisations, including youth organisations who spoke very positively about the reform, the draft reform was debated in parliament.
The Labour opposition was not against the reform per se but wanted to postpone everything until 2010, for the reform to come into force in 2011.
They were smelling an electoral victory in 2008 and were hoping to get the credit for pension reform. Since it was urgent, it was enacted in 2007.
What did the reform entail? For those born after 1962, the pension age went up to 65 years. Instead of 30 years of contributions to receive a pension, one had to have 41 years of contributions. And the national insurance contributions went up by about a third.
Giving an increase to 10,000 out of 77,000 pensions is the pinnacle of discrimination- Joseph Zahra
If this reform had not come into force, those born after 1962 would have been doomed to earn a pension not commensurate with the cost of living.
Those who, like me, were born before 1962 did not lose anything. On the contrary, to keep pace with a rising standard of living, the cap on pensions went up from €10,485 to €13,980, and cost-of-living increases were given in full as from January 1, 2008, instead of the previous two-thirds. A grant of €350 was introduced for old age pensioners of 75 years and over who were living in their own home.
The most important measure was that every five years, the reform had to be revised, with the first revision taking place in 2010 and then in 2015 and 2020. This is because such reforms are not written in stone and every five years things happen that no politician is able to foresee.
During the past 10 years, this reform was swept under the carpet. In this year’s budget speech, the minister of finance announced “a mechanism that ensures adequate increases to pensioners in the future”. That is, from this year, “those pensioners who were born before 1962 and whose current salary had they still been working would exceed their maximum pensionable income, will be receiving an additional increase in their pension which varies according to the salary”. He added that nearly 10,000 pensioners are expected to benefit from this measure.
As of September 2023, there were 77,125 retired pensioners of whom 58,820 were on a two-thirds pension. Giving an increase to 10,000 out of 77,000 pensions is the pinnacle of discrimination.
The prime minister’s tirades about pensions were probably intended to deflect attention away from the social policy minister’s urging to invest in private pensions.
The minister insisted that on the current demographic trends, we need to talk about private pension plans as there is no guarantee of what will happen in the future.
That was why the pension reforms of 2006 introduced a revision every five years. Such revisions would have pinpointed loopholes in our pension system and came out with solutions.
Actions delayed cause negative repercussions.
Joseph Zahra is president of the Association of Pensioners and Senior Citizens PN (APAN).