Planning for the future
A healthier diet based on artificially synthesised foods and improvements in medical care will see life expectancy rise over the next four decades. According to Eurostat data this will see the number of 60+ persons double from the current 11% by the year 2050. This was stated by Mark Vella, head Business and Marketing at BOV Asset Management during the second quarter seminar organised by the MHRA.
Despite the increases in state pension age, it is expected that the pensioner population will continue to rise. In fact, the number of working age people per pensioner is expected to fall and by 2050 (Eurostat data) there will be two people of working age for every person of pensionable age. In this scenario, alternative pension arrangements, outside the state pension, are urgently required.
Last year the Maltese Government introduced the Voluntary Occupational Pension Schemes Rules which came into effect on 1 January 2017. Government also introduced a number of fiscal measures to make these pension schemes attractive for both employers and employees.
An Occupational Pension Scheme is set up by the employer and both the employer and employee can contribute an amount into the pension scheme on a regular basis. Pension benefits will supplement the state pension, at retirement age. Besides the tax benefits, an Occupational Pension Scheme will also help employers retain their existing employees.
It is important to note that Occupational Pension Schemes require a substantial amount of resources and participants to run successfully. Vella suggested that an umbrella association could be a possible solution for the MHRA where the members of the association will have the opportunity to plug into the pension scheme for the benefit of their employees.
Vella ended his presentation by quoting Warren Buffet, a well known American business man, who is widely considered to be the most successful investor worldwide. Vella advised that all of us have to reflect on what Buffet says “different people understand different businesses. And the important thing is to know which ones you do understand and when you're operating within what he calls your circle of competence”.