The Malta Institute of Management is highly concerned on the Pensions matter in Malta. Although some steps have been taken a few years back certainly the situation is not sustainable in the long term.

Increasing the Retirement age should be the last thing to consider as different needs arise for persons at a certain age. It is indeed unfair for persons contributing all their working life to find themselves in a position to continue working despite their specific necessities. Whilst MIM feels that encouraging the elderly to remain productive and to share their experiences with the younger generations may be healthy to some and definitely a right, this should be totally voluntary. Many professionals nowadays choose to continue in their professional lives but want the necessary assurance of a pension as many do reduce their working times.

The first immediate action needed is certainly the incentivizing of people contributing in a third pillar which is totally voluntary and encouraging employers to contribute to that pillar too. Malta in the past had tax exemptions which was lost for various reasons. MIM recommends that the Government of Malta should consider reintroducing similar or different incentives. However, this needs to be done with responsibility and with proper education that allows for contributors to understand in the schemes they are investing in. It is indeed a fact that many contributors in foreign schemes were victims of wrong investment strategies. Malta is not immune to this and now regrettably even Malta was subject to investors suffering due to inappropriate information provided. Pension schemes should be strictly regulated and monitored by the appropriate authorities. The authority should be in a position to question the investment strategy and the effective communication provided to contributors.

The ring fencing of the contributions paid today is no longer an option. Government should be committed to ring fence the contributions  fund. This has been postponed from one administration to the other with no administration making the difference in the management of such funds. The common reason given not to start this ring fencing process is that that there is no identification of such funds or that  there are no funds as of today. Government should consider to establish the fund through an interest free loan in order to start operating. The fund should be co-managed by Government and the Private Sector. The fund should actually invest itself in order to ensure the necessary income for the pensioners in our country. It must be a prudent and conservative investment strategy possibly in activities in the Maltese economy. All current and future or a considerable part of the contributions will go towards the ring fenced commercially managed fund. This in itself will already improve the situation that the country is in at the moment.  The funds for such an interest free loan may be generated  through alternative financing methods existent and used in many countries.  On various occasions the MIM has introduced to Government representatives solutions for such alternative financing that may be used for this and other needs. Unfortunately such alternatives seem not to be on the agenda of such representatives.

A similar change will allow the country to extend the sustainability of the current system.

Given the business and economic environment it is also not thinkable nor imaginable to add further costs to employees or employers with an obligatory second pillar. In its position paper in the previous paper on Pensions MIM already expressed its concern on the second pillar particularly if the contributors’ money is diluted through administration costs in multiple schemes and on the risks that this may bring with it. There is also the problem of the portability of the contributions when one changes jobs, which is quite regular especially in SMEs. This could be an administrative nightmare considering the thousands of small and micro enterprises and could lead to prohibitive administration costs. Furthermore, through adequate actuarial analysis it may result that the amount of contributions needed for such a fund to function may result to be prohibitive and in reality may be damaging to the competitiveness of Malta leading concerning consequences. In this context, as already noted, the second pillar option is in reality not an option in the current economic scenario. However, there may be other options that Malta could adopt in order to ensure a fair and serene retirement respecting the human dignity. The various options should come out of a detailed analysis of the saving patterns of the Maltese apart from demographics. This may give rise to innovative ways to look to ensure a decent living at retirement age. MIM however, recognises the difficulty of doing such an exercise given the drastic changes in such patterns and perhaps the lack of appropriate primary source data. This may also be difficult through the Census due to cultural issues. However, certainly no appropriate decisions may be taken without such information or at least adequate projections through specific studies.

The MIM recommends also that a Permanent Commission for the Review of Pensions (not referring to the Pensions Working Group already in place) is introduced so as to constantly monitor and suggest improvements to the founding criteria over the years. This Commission should be made up of representatives from various sectors including experts in certain related fields . This should ensure that the whole process is constantly reviewed and any potential future pitfalls be avoided and addressed in a timely manner. Pensions are a national issue that merits the due attention and the methods proposed be the outcome of the necessary diligent study before being implemented.

MIM is of the opinion that the pensions matter cannot in any way be bipolarised by the Political parties and all resources and energies including those of professional bodies and the social partners  should be used to find a long term sustainable Pension for the foreseeable future generations.

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Founded in 1964, the Malta Institute of Management is a non-political, non-negotiating and non-profit making professional body for persons in Malta concerned with and involved in management.

Further information may be obtained from the MIM website: www.maltamanagement.com

Media Contact:  Reuben Buttigieg – rbuttigieg@maltamanagement.com