Ensuring retirement income security
Arecent Times of Malta editorial implied the government is doing nothing to sustain the national pension system, using terms such as “the pensions time bomb” and saying that “the economic model that has encouraged consumption for decade is beginning to show it is unsustainable”.
First, let us be clear that there is, in fact, no pensions time bomb. This is an idea that has been touted around by some who have always sought to undermine the welfare system. The fact, however, that changing demographics will raise outlays on pensions is well known, and that means that we can plan for this increased outlay and make necessary adjustments.
In fact, our national legislation places a statutory obligation on the executive to carry out a strategic review of the pension system every five years. A review which has resulted in various substantial changes that have improved sustainability.
To give one clear example, in the 2010 strategic review it was forecast that, by 2060, the pension deficit would be 5.8% of GDP. The latest review, in 2020, showed projections of a 2% deficit. In no way does this mean that we can rest on our laurels but to claim that there is an imminent time bomb contradicts facts.
Similarly, the argument that the government has pushed for excessive consumption does not stand a basic fact-check. The latest NSO GDP press release indicates that, in 2023, household consumption in real terms was €6.8 billion, or 44% of GDP. Back in 2012, it was 55%. Economically, Malta’s GDP has grown through an expansion of exports, not consumption.
The European Central Bank’s distributional wealth accounts further show that Maltese households have net wealth equivalent to more than six times our GDP. On average, today, a Maltese household holds twice the assets it had in 2012 and is 25% wealthier than the average family in the euro area. Household deposits with local banks, in turn, exceeded the €17 billion mark for the first time this January. Moreover, a low-income family in Malta has more bank deposits per capita than an upper middle-class Italian one.
The main reason why households’ financial wealth has boomed in recent years has been the extraordinary improvement in our labour participation rate. Back in 2012, we were the Cinderella of Europe when it came to female employment rates. Now, we are right there with the top countries.
Yet again, since 2013, we have halved the number of those dependent on social assistance and reduced the numbers on the unemployment register to a seventh of what they were. We now have the lowest employment rate ever recorded.
This happened because we introduced such innovations as free childcare, the tapering of social benefits and the in-work benefit. These are reforms that have earned us the respect of many in Europe, reforms that have changed our social welfare system, from one that penalised work to one that creates a positive incentive to work. In fact, persons who move out of unemployment in Malta face the second-best financial incentives in Europe.
The suggestion for introducing mandatory measures to sustain our pension system has been heard before. Many times, there have been those who argue that, unless you put in mandatory increases in pension age, people will not work longer. The reality, however, is that, here in Malta, we have kept the early pension age of 61 and, yet, Eurostat data shows that the average career duration for men has risen from 40 years in 2012 to 42 a decade after. For women, we have moved from 24 years to 35 in the same period.
For both genders, our current career duration is longer than that in the EU, even though our pension age is lower. This was achieved not through the imposition of hard rules but because we created the incentives for people to lengthen their career, through a well-thought deferral scheme, which has led thousands to shy away from the early pension age and, instead, retire later.
As for private pension saving, the financial incentives which were introduced a few years ago are also leading to thousands saving for the future. Not through some fear of a pensions time bomb but because the tax credit offered makes financial sense. There is indeed nothing on the financial markets that ensures that the same year you invest €1,000 you get €250 back.
Rather than going for a mandatory system, in the latest budget speech, the minister for finance stated that the government “believes that we must reach a state where every worker is automatically subscribed to a private pension scheme although they will continue to have the option of voluntarily opting out of it”. This is clearly the best way to continue progressing forward in this area.
After all, planning for one’s future is not a sin.
“There is, in fact, no pensions time bomb
Michael Falzon is Minister for Social Policy and Children’s Rights.
contemplating these last words of Christ. Firstly, we cannot possibly ever be forsaken, living as we do in the mind of God. The despair largely arises because we do not direct our attention towards the transcendental goodness of our creator. Christ’s final words were voiced as He turned His attention towards His true nature and this makes perfect sense. On the third day, Christ arose from the dead and manifested His glory, making evident God’s power over suffering, death and evil.
The Christians of the world should set aside their differences and unite. Our societal norms must reflect Christian values. We need to discard this secular nonsense. How can a Christian accept to abide by secular precepts? This is not only a contradiction in terms but a prime hindrance to a Christian life.
We should vote for people who live their faith and not for hypocrites who signal virtues for votes. We should respect people who have different beliefs. We must, however, be true to our own.
Elected national, and unelected supranational, politicians should embrace and reflect truth. They need to openly acknowledge that they are beholden to a higher moral order. Corporate and political elites should pledge their allegiance to the universal principality whose nature is that of goodness, truth and empathy. Their actions should reflect wisdom and compassion.
As Christians, we are called upon to take responsibility for our thoughts, words and actions. We do know that there are consequences. If we behave unskilfully we cannot expect positive results. Christian values are not superstitions or archaic beliefs. They are an effective set of axioms for a mindful, rewarding, fulfilling and interesting life.
Christ’s two commandments, to honour God and to love our neighbour as ourselves, are the basic preconditions for a moral, cohesive, resilient, secure and prosperous community.
In a world where hope is thin on the ground, we should dare to dream and not complain about being forsaken. As Christ did on the cross, let us turn our attention to the highest principality that is our creator. Then everything changes.
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