The government-appointed Pensions Strategy Group has published a document entitled ‘Strengthening the pension system’, which aims to provide a strategy for adequate and sustainable pensions in Malta.
Most members of the group are civil servants and social scientists who are knowledgeable in this field.
They have obviously done their homework and have also come up with some forward-looking proposals.
I agree with a number of the recommendations made, though I feel there are some omissions that need to be included in the strategy. Some other proposals are likely to face political toing and froing and at least one calls for the postponement of what might be the elephant in the room of pensions.
I discuss these by referring to some specific recommendations in the document.
Recommendation 1 suggests that contributions are credited for child rearing, a positive acknowledgement of those who take care of children. What is unclear is why the age limit of children is six years and whether guardians and EU residents living in Malta feature in this.
There are some omissions that need to be included in the pensions strategy
The second recommendation proposes that contributions are credited for those hold recognised tertiary qualifications. Again, this is a positive proposal but it would be more inclusive and equitable to include other qualifications, such as Level 4, which, for example, includes diplomas for childcarers who study to work in low-paying jobs with huge responsibilities.
Recommendations 12 and 13 aim to ensure a fair balance is struck between contributions and benefits across generations, emphasising that the contributory period to have a full pension for persons born in 1965 or later should increase from 40 to 41 years.
Notwithstanding other proposals, which deal with credits and retirement at an age earlier than 65, it is unclear as to what happens to those who fail to meet the established contributory period, especially when one considers that precarious, flexible, part-time and definite employment is on the increase.
It is also positive that proposals such as recommendation 14 discuss the incentivisation for deferral of a retirement pension for those who opt to keep working beyond retirement age.
At the same time, recommendations 15 and 16 refer to gradual increases in the national minimum pension and the old age pension, which, I assume will be subject to negotiation by the social partners as regards the actual amounts.
The same can be said on the proposal regarding payment to former service pensioners. In recommendations 18 and 19, the introduction of incentives for a voluntary third pillar pension are discussed. However, with regard to a mandatory second pension, this measure is postponed for discussion during the 2020 strategic review.
I believe this will not help in terms of intergenerational justice and sustainability. Indeed, in my view, this is the greatest omission of the proposed strategy.
It would have been better to emphasise the need to introduce a mandatory second pillar pension that takes account of different employment realities and which obliges the government to make up for those who at any point in time do not have enough means to enrol.
The pensions strategy itself says that many people do not tend to think long term and it also says that, eventually, Malta’s pension system will become unsustainable if no changes take place. Hence, an unavoidable challenge is being postponed for future administrations.
Recommendations 25 and 26 focus on gender equality, especially with respect to widows. Though this is positive to ensure a better quality of life for such individuals, I would recommend that the wording also refers to those in civil unions and in cohabitation in order for them to be covered when legislation on the latter is introduced.
It is positive that the Pensions Strategy Group is also proposing increased education and the introduction of a regulatory framework for equity release schemes is being proposed to formalise the option of elderly people who wish to release or exchange property once they retire.
As things stand, there is not enough knowledge of pensions matters, even among highly-educated people. An important role of modern welfare states is to invest in people’s education to ensure everyone is equipped as much as possible to seize the opportunities and spot the risks of an increasingly liquid society.
A glaring shortcoming of the proposed strategy is that it does not refer to EU citizens living in Malta.
Even though EU social policy is increasingly introducing the portability of pensions schemes to ensure that people who move from one EU country to another have their pension rights safeguarded, it is strange that this social reality is ignored in the Pensions Strategy Group report.
Such individuals are contributing to Maltese society and to the economy and the least that can be done is to ensure their obligations, such as national insurance contributions, and caring roles are matched up by rights, such as adequate pensions.
Michael Briguglio is a sociologist.