[WATCH] Minister rules out rise in pensionable age or social security contributions

Until around 2040, Malta’s pension system is mostly sustainable thanks to the country’s pace of economic growth

Social solidarity minister Michael Falzon and shadow minister Claudio Grech discussing the pensions issue on Xtra
Social solidarity minister Michael Falzon and shadow minister Claudio Grech discussing the pensions issue on Xtra

Social solidarity minister Michael Falzon said Malta’s economic pace was strong enough to ensure pension sustainability for the next 20 years.

He also ruled out any increase in the retirement age or in the rate of national insurance contributions, saying the government would deal with circumstances as they arose.

On TVM’s Xtra, Nationalist MP Claudio Grech insisted that pensions should be at the top of the government’s agenda and were the country’s biggest priority, drawing attention to elderly citizens who should have pensions adequate enough to live a decent life.

“There are numerous anomalies and injustices, where pockets of people have trouble with their pensions due to various reasons. This includes people who had gaps in their NI contribution.

“There is then the matter of sustainability, an area where the government has to use its available mechanisms – such as the strategic review report – and start to act on this now.”

Falzon said the government had already started to address pensioners with missing NI contributions, to allow them to pay them back and collect their pension. “The government has increased pensions, after 25 years of them remaining at the same level,” Falzon said.

Falzon also gave short shrift to calls for a rise in pensionable age to ensure the sustainability of pensions. “Up to 2013, the pensions commission used to keep drawing our attention to the question of Malta’s retirement age, but it is no longer doing so – the economy is moving well. I will not say ‘never, ever’ but it is not on our agenda to increase either the retirement age or NI contributions. We will deal with this if the need arises.”

Mark Musu, the permanent secretary at the ministry for social solidarity, made it clear that until around 2040, Malta’s pension system was mostly sustainable.

But Karmenu Mallia, president of the Alliance of Pensioners’ Organisations, said pensions had not increased with inflation, so pensioners’ purchasing power could not keep up with the earnings of those in employment, leading to an increasing gap between rich and poor.

“There is the option for a second pillar pension, part of which would be private. There is also the third pillar, which we legislated upon in 2015,” Falzon said in reaction.

“We are not saying the second pillar should be obligatory, but we are creating measures to facilitate both these pillars… It is possible that when you have an economic growth rate of 6-7%, some of those in employment might quickly increase their purchasing power. However pensioners’ purchasing power has increased in other ways, such as cheaper utility bills, no more out-of-stock medicine and the increase of the tax ceiling to €13,200.”

Grech disagreed with doing nothing just because pensions were sustainable until 2040. “I think pensions should be the biggest priority of the country, and this also emerges from 2016 figures issued by the National Statistics Office, showing that those over 65 are at the greatest risk of poverty and social exclusion,” he emphasised, asking why the ‘surplus government’ was not doing anything to address the issue.

Grech said the government should stop prioritising operational spending, since Malta needed a government which spent more on those who really needed it, with pensioners being at the forefront.

While conceding that the risk of poverty for those aged over 65 had increased marginally, Falzon said that nobody could deny the government had addressed poverty. “In 2013, 99,000 were at risk of poverty, but by 2016 we decreased it by 14,000 to 85,000,” he said, “When it comes to those in poverty, severe material deprivation stood at 39,000 in 2013. By 2016, it decreased to 19,000. The figures for those over 65 were at 4,000 in 2013, but we lowered it to 3,000 by 2016. We are anticipating it will continue to decrease.”

Grech maintained that the technical research on pensions had to now be discussed on a political level. “We would be morally irresponsible if we did not look into how the pensions situation in our country will evolve,” he said.

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