The Western World has an ageing population, and Malta is no exception. It is estimated that by 2020, a quarter of the population will be over 60 and approaching retirement age.
As things stand, we have the first pillar pension which is the standard. We have, of late, the option for private pensions but Government is now ready to introduce third pillar pensions, which are tantamount to a voluntary private pension scheme.
But, the crux of the issue is that here in Malta, it is people of working age who are paying for today's pensions. As we, as a nation, get older, we will be piling even more pressure onto an already creaking system that is feeling the full weight of our population growth and our longevity. As we get older, we are not only putting more burden on the lopsided system as it is, but we are further straining the coffers because, put simply, we get older and we get more infirm, resulting in more expenditure on the national health system in terms of care and medicine.
The Nationalist Party is now piling the pressure on the government to introduce the second pillar. It claims that one shouldn't be introduced without the other. What is the second pillar? In essence, it is creating another 'vault' where today's workers will pay-in. But rather than the money being spent on the here and now, in terms of today's pensions, that fund will not be touched and will only be tapped into once this generation of working age retires. Even then, we do not have a failsafe system. The value of €100 today will not be the same as in 2050, for example.
The PN is pushing the idea hard and has even lobbied for it to be kickstarted in the upcoming budget. But we have to ask the PN, why now? The PN has been in office for 25 years and had this hot potato sitting in its lap for a good 15 years while it was in government. Although it held numerous conferences on the subject and consulted with all and sundry, it never did much to actually tackle the problem. Lawrence Gonzi's Government did take the first step in reforming matters by altering the NI contribution rates for people born after a certain date and by increasing the retirement age. But it never grasped the bull by the horns and implemented the second pillar. Only today, just after 19 months in Opposition, is the PN demanding Joseph Muscat's government to introduce the 2nd pillar which in essence will impose a new contribution on workers and employers alike.
No matter how unpopular, something must be done. For years on end, various experts have warned that this issue will eventually blow up in our faces. At the end of the day, it will be employers and employees who will have to bear the burden, and as a result the government will have to come up with some way to incentivise people to contribute. Tax relief to those who take up the 3rd pillar could be one way of doing it. But the only hard and fast manner to execute the plan is to make people realise and understand that if this does not happen, we will all be getting much smaller pensions, if any, later in life and we will not be able to make ends meet. Pensioners barely can do that now as things stand.