UHM proposes two-pillar pensions system

The importance of pensions reform was underlined by the Union Haddiema Maghqudin yesterday when it submitted its reactions to the government's White Paper on the matter.

Unless the situation is addressed, future pensioners risk a reduced quality of life, union general secretary Gejtu Vella explained.

The UHM is expecting a new system to be discussed and possibly agreed upon by all the social partners, Mr Vella said.

Union president Gejtu Tanti said the new system needs to guarantee a minimum national pension, which permits a decent quality of life for pensioners.

Mr Tanti said the pension age should gradually increase to 65. The UHM is proposing that workers under 40 as at January 2007 should retire at 65, those between 40 and 44 should retire at 64 but may work up to 65, those between 45 and 49 should retire at 63 but may work up to 64, those between 50 and 54 should retire at 62 but can continue working until 63, male workers aged 55 should retire at 61 and may work up to 62 and female workers aged 55 should retire at 60 and may work up to 62. Workers should continue paying national insurance contributions until they stop working.

The UHM said workers should be allowed to retire voluntarily before the retirement age if they had paid contributions for more than 40 years or if they reach retirement age and would have paid NI contributions for a period of no less than 30 years.

Mr Tanti said this proposal was aimed at allowing those who wanted to keep working past their retirement age to do so. He said fiscal incentives for those who decide to keep on working should also be introduced.

The union believes that the calculation of one's pension should remain as at present - an average of the best three years out of the last 10 years for employees and an average of the last 10 years for self-employed.

Mr Tanti stressed the importance of setting up a fund solely for social security payments and pensions. He also emphasised the importance of revising invalidity pensions and eligibility in a bid to eliminate abuse, while introducing rehabilitation programmes for alternative employment.

The system also needs to take into consideration women who stop working to have a baby and parents who stop working to bring up their children.

The union is proposing two pillars, with the obligatory first pillar ensuring an adequate pension that permits pensioners to maintain a similar quality of life after retirement. "The government should remain responsible for this first pillar," Mr Tanti said.

The pension capping under the first pillar - that currently stands at Lm6,750 - should gradually increase.

The second pillar being proposed by the UHM is on a voluntary basis. This, Mr Tanti explained, can include private pension schemes, which currently do not exist in Malta. He said this second pillar should be regulated and administered by the Malta Financial Services Authority, with the participation of the social partners. Moreover, the individual should be free to choose whether to get his pension from the second pillar as a lump sum or as a pension or a mix of both.

Mr Tanti said that as a fiscal incentive, contributions up to 10 per cent of the salary through the second pillar should be exempt from tax. In addition, people who have assurance policies should be able to convert them into pension schemes under the second pillar. An information campaign about the issue should be launched.

The union is proposing that the MCESD monitors the pension system annually in the first five years, after which the system is revisited every three years.