Wealth-generation 'a pre-requisite' for successful pension reform

The Malta Employers' Association believed that pensions reform should take into consideration the current state of public finances and the economy, its president, Arthur Muscat, said.

At a seminar held at Le Meridien Phoenicia, in Floriana to inform employers on the contents of the White Paper on pensions reform, Mr Muscat said a pre-requisite for successful reform was expansion in the private sector to create wealth and revenue sources for the government.

"The association has been insisting that the number of employees in the public sector needs to be reduced and extra labour absorbed gradually by the private sector. In turn, the private sector needs to get the necessary incentives and industrial infrastructure to employ more people," Mr Muscat said.

"We can only have an enhanced pension system if we can earn it," he said, explaining that this would only be possible if the country remained sufficiently competitive to attract investment.

The MEA agrees on the need to increase labour participation and is also in favour of flexible retirement.

According to data gathered by the MEA, 52 per cent of employers said employees retained beyond pensionable age could hinder employment and 33 per cent said they did not.

Social Solidarity Minister Dolores Cristina explained that the need to reform the pensions system was a rational conclusion that many shared.

Ms Cristina explained that with Malta's aging population - the elderly cohort is expected to double in 50 years' time - and a falling birth rate, the current system where workers paid for pensioners would not be sustainable in the long run.

In 2003, the number of pension beneficiaries stood at about 38,000, the minister said. "This number is expected to shoot up within 15 years and to more than double the current figure in 50," Ms Cristina said.

She quoted studies showing how the average retirement age of the Maltese was 58.4 for men and 54.8 for women. Thus, people are not only living longer but also retiring earlier.

Ms Cristina said the balance must be achieved through a series of measures that were introduced gradually and not radically. A single measure introduced immediately should be avoided.

"The reform of the pensions system can only be taken in a balanced manner if all the stakeholders and players agree that the best way forward is consensus - one which demands tradeoffs among sectoral demands and interests," Ms Cristina said.