Introducing ĠEMMA

The work carried out on pension reform since 1997 by different government-appointed working groups shows that the State pension is limited to ensuring that pensioners are able to live in dignity on an adequate pension.

As persons live longer and have a far higher healthy life expectancy than pensioners a generation ago, the adequate level of income that the State pension provides will not suffice to allow them to lead the quality of life enjoyed in pre-retirement.

Active ageing, resulting in increasing higher levels of ‘young’ old (65 years to 69 years) and ‘old’ (70 years to 74 years) persons remaining active in the labour market, may bridge their respective ‘income’ gap between employment income and retirement income. The fact, however, remains that for persons to enjoy a quality of life during retirement equal to that enjoyed in pre- retirement they have to assume responsibility to save enough to provide for an income in retirement over and above that provided by a State pension.

Experiences in other countries show that no reform of the pensions system alone results in meaningful change unless this is complemented by the inculcation of a culture of self-responsibility for retirement achieved by instilling an understanding of the importance of saving for retirement.

As at 2010, there was no strategy directed towards financial capability. The 2010 New Pensions Working Group underlined that the absence of retirement knowledge and financial literacy was a serious lacuna that needed to be addressed within the context of pension reform. The 2010 PWG proposed that the government should establish an independent permanent Commission on Retirement Income and Financial Literacy directed to inculcate a culture of saving for retirement and to strengthen financial literacy across society.

A Commission on Retirement Income and Financial Literacy (Commission) was set up in July 2012. Given that the Commission functioned only till early March 2013 it was not in a position to deliver on the initial goals set for it – (i) a strategy on retirement income and financial literacy; and (ii) the carrying out of a baseline survey to assess the level of financial literacy in Malta.

The new administration in July 2013 set up a new Pension Strategy Group. In the terms of reference assigned to the PSG by the new administration in July 2013, the responsible Ministry tasked the Group to: “Develop a communications strategy directed toward raising the level of public awareness on pension issues in Malta and the need to ensure that future pension incomes are adequate in order to sustain a high standard of living in retirement.”

The PSG in its 2015 June report and, subsequently, in its September 2015 post consultation report, emphasised that long-term successful impact of pension reform requires knowledge, education and information on retirement income and financial literacy that transcends the Maltese polity, from young children to retirees.

In October 2015, a multi-stakeholder working group, consisting of the Office of the Permanent Secretary, Ministry for the Family and Social Solidarity, the Department for Social Security, the Department of Quality and Standards in Education, the Malta Financial Services Authority, and Finance Malta, was set up under the PSG to draw up a strategy on retirement income and financial literacy.

The draft Strategy proposed the following thrusts:

• The use of education to promulgate knowledge on retirement income and financial literacy. • The provision of trusted and independent information and undertaking of programmes directed to change behaviour and inculcate a new culture visà-vis long-term retirement planning.

• Working in partnerships to strengthen the connections among stakeholders involved in retirement income and financial literacy.

A consultation process was launched by the responsible ministry in January 2016 – which consultation was concluded in September 2016. The feedback received during the consultation process agreed on the need for a robust strategy on retirement and financial capability as well as on most of the core principles and initiatives proposed in the draft strategy.

During the consultation process different stakeholders stressed that the strategy should give greater emphasis to the issue of vulnerable groups and retirement / financial management. The point was emphasised that, therefore, the strategy should focus more on ‘capability’ rather than ‘literacy.

The feedback was taken on board and the strategy launched in January 2017. The strategy established the following vision: “Improving the personal financial capability of Maltese citizens during life-events and retirement to enable them to reach better informed financial decisions that fit their individual circumstances.”

The vision identified the following core knowledge and skills domains for a Maltese citizen to be financially capable:

• Manages debt.

• Manages daily budget.

• Builds a safety net.

• Plans for the future. • Understands basics of the finan

cial landscape.

• Understands basic consumer rights.

Implementation of the strategy initiated immediately following the launch of the strategy. A Retirement and Financial Capability Unit was set up within the Office of the Permanent Secretary of the Ministry for the Family, Children’s Rights, and Social Solidarity.

Initial efforts where directed towards:

(a) Drawing up an ESF application for financing of approximately €500,000 to launch a certified financial education programme, a long term communications and education campaign; and a responsibility living programme.

(b) Setting up of a trusted independent portal on retirement and financial matters – which was officially launched in late November 2017.

(c) Launching an Onfoq bilGħaqal Campaign for the 2017 festivities season.

In January 2019, following carrying out of focus groups, the retirement and financial capability initiative was branded ‘ĠEMMA’ – the name given to ‘honey bee’ which fronts the ĠEMMA campaign.