The Times, January 26 2015
The statistics on income and living conditions, which were published recently, are yet another reminder that Malta should not keep postponing pension reform.
According to the survey, 20.8 per cent of persons in Malta aged over 65 are at risk of poverty and social exclusion, 16.9 per cent are materially deprived and 7.1 per cent are severely deprived.
Another recent sociological study, known as ‘Social justice in the EU - social inclusion monitor Europe’, by Bertlesmann Stiftung, had similar results.
Malta hovers close to the EU respective averages and, though we do not have the terrible situations of countries such as Bulgaria and Romania, we are quite far from best European performers such as Luxembourg, the Netherlands and Denmark.
I concur with the comments made by my colleague, Mario Vassallo (Times of Malta, January 8) that Malta has a very serious problem with pensions.
Indeed, Vassallo highlighted that people on the national minimum pension are earning between €472 and €552 a month and that even those who previously had high incomes of about €3,000 a month are now earning a relatively low €928 a month.
He correctly pointed out that elderly persons struggling with poverty may end up buying inferior goods and services, resulting in health problems, in what can be seen as a multiplier effect.
In this regard, I have every reason to believe that Malta’s national strategic policy for active ageing is a vital step in the right direction. Hopefully, this policy will help bring about both a better quality of life and empowerment for elderly persons.
However, I believe then when it comes to pension reform, the government is putting short-term electoral considerations before long-term objectives on sustainability and social justice.
Apart from initiatives such as the continuation of the yearly €300 grant to over 75s and some improvements to those in receipt of services pensions, the Labour government seems reluctant to introduce widespread pension reform.
Labour has written off the previous government’s plan for a compulsory second pillar pension scheme and, instead, introduced a third pillar voluntary pension scheme. Practically, this means that people may obtain a tax credit for contributions made to personal retirement schemes in which they may choose to invest.
I view third pillar pensions problematic for two main reasons.
First of all, they perpetuate economic inequalities because they are more likely to attract and reward high-income earners to invest in personal pensions.
Secondly, many people do not invest in such long-term considerations for various cultural and situational reasons, ranging from a here-and-now cultural orientation to more immediate economic concerns.
Unless the government adopts a ‘paternalist’ approach on pensions, many people may simply opt out from such responsibility. This is why a second-pillar pension can be more socially just and sustainable.
Such a pension would cover the entire population and funds within the scheme can be invested and then used strictly for pension purposes. Labour market participants would top up contributory pensions through extra savings that help guarantee a better pension upon retirement age.
The system should be flexible enough to cater for those who, for some reason or another, move in and out of the labour market. Such reasons may include unemployment, precarious employment that does not make work pay, caring responsibilities, study and individualization of lifestyle, the last case often being characterized by a number of changes (both intended and unintended) along one’s life course.
The system should also ensure that foreign workers are incorporated in the scheme.
The government should make up for those who, for legitimate reasons, cannot afford second pillar pensions.
It should also ensure that the basic non-contributory pensions are adequate to guarantee a dignified quality of life for all elderly people residing in Malta.
Such a reform can be a hallmark of responsible policymaking that binds different age groups together through cross-generational solidarity while also encouraging people to seek employment.
There are other policy priorities which are linked to pension reform. These include the need to keep increasing the country’s workforce. The government’s welfare reforms – including the tapering of benefits and universal access to childcare - intend to make work pay in this regard.
However, I appeal to the government to divest from entering into the neo-liberal route of punitive conditional welfare – which ‘punishes’ those who for some reason or another do not take up the government’s conditions, for example, in the Youth Guarantee Scheme.
I also appeal to the government to make sure that workers are afforded sufficient protection through legislation guarding against precarious employment and also to raise the minimum wage.
The alternative to pension reform may be unsustainable pensions, increased inequality and poverty among pensioners in the years to come. In view of Malta’s changing demographics, which include an ageing population, it is high time that this issue is given the importance it deserves.