In his opinion piece ‘What pension for those born pre-1962’ (June 12), Arnold Cassola claims that the pensions of those born before 1962 are being kept frozen through some decision of the current administration.
In a year when pensioners have been awarded the highest-ever increase, this claim could not be more wrong. The 2023 Budget, in fact, awarded all pensioners, irrespective of their birth year, an increase of €650 yearly, or €12.50 per week.
Mind you, this is not the first time that pensioners have been given increases that exceeded the COLA. In fact, instead of rising by just €26.47 per week due to the COLA increases awarded since 2016, pensions have risen by €51.69 per week or by nearly double the COLA increases.
On the contrary, under the then Nationalist government, until 2008, pensioners were not even awarded the full COLA. The previous administration then introduced a cost-of-living bonus to award the full COLA. But the way this bonus operated still negatively affected pensioners. So much so that, in 2022, we amended this to address this anomaly.
In the last two budgets this measure alone has meant another additional increase of €4 per week, or €208 annually, to tens of thousands of pensioners born before 1962.
Another pensioner group, which surely cannot be said to be facing frozen pensions, are widows and widowers. Whereas, before 2016, these persons received a pension which was only five-sixths that of their deceased spouse, since then this administration has worked to remove this discrimination.
We started first by granting a full survivors’ pensions to those who, before their partner was deceased, were in receipt of their own pension. Since 2022, we have furthermore started to gradually adjust the survivors’ pension rate for all survivors.
In the last two years, this measure alone raised their pension by €8.54 per week, or €444 yearly, for thousands of our most vulnerable pensioners. This will carry on until the full pension will be inherited.
Besides all of this, from last year, this administration has also introduced an additional benefit through which pensioners and others on benefits are shielded from the impact of high inflation. Last year, this new benefit meant additional expenditure of over €16 million.
Cassola complains that the 2023 Budget included a sentence stating: “We will also introduce a new limit concerning pensioners who were born from 1962 onwards, which will be tied to the highest pension such persons can receive.” He claims that this means a loss for pensioners born before 1962.
The 2023 Budget awarded all pensioners, irrespective of their birth year, an increase of €650 yearly- Michael Falzon
What he does not state is that this line is under the heading “adjustment of tax exemption on pension income”. Basically, the amount of pension income that will be exempted for taxation purposes will be increased to the new level of the maximum pension paid to those born before 1962.
I wonder here, a misinterpretation or wilful deceit?
This is clear evidence that, far from having frozen pensions, pensioners born before 1962 are seeing an increase in pensions, so much so that the government has had to amend the income tax regulations so that these increases do not end up being taxed.
Let me take the opportunity to remind readers that this administration was the first in history to make state social security retirement pensions income-tax free. Previously, pensioners would have been taxed at least 15 per cent on all regular pension income above €976 for married pensioners and €700 for single pensioners.
Finally, the “institutionalised ageism” that Cassola claims has been introduced reflects legislation enacted in 2006. The fact that those born after 1962 can qualify for a higher maximum pension also reflects more onerous contribution conditions. The retirement age, which was 61, was increased gradually to 65 and the yearly average amount of contributions was raised from 30 to 40 years (and subsequently to 42 years for future cohorts).
The calculation of pensionable income changed from the best consecutive three years out of last 10 to the best 10 years in the last 40 years, another measure that tended to make the pension calculation more onerous for the contributor.
Moreover, those born before 1962 pay contributions on a lower income. For example, a person born up to December 31, 1961, earning €500 per week, pays €39.28 in contributions, whereas someone born on or after January 1, 1962, pays €50, or 27 per cent more.
I wonder, again, misinterpretation or wilful deceit?
All that apart, this administration is committed to continue addressing the remaining concerns for pensioners born before 1962. In fact, the Pensions Action Plan published in November 2022 indicates that among adequacy measures which are planned is the establishment of a single indexation mechanism for increases to the maximum pensionable income.
This administration remains committed to safeguarding better pensions for all.
Michael Falzon is the Minister for Social Policy and Children’s Rights.