The Malta Independent 25 May 2024, Saturday
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40% think information on pensions is ‘poor,’ new strategy aims to close the gap

Tuesday, 26 January 2016, 16:04 Last update: about 9 years ago

Up to 40% of respondents in a recent survey said they felt that information on pensions was poor. Out of this number, over 90% do not save for retirement. 66% and 79% of a sample of 1,255 do not know the maximum weekly social security pension income.

Most respondents do not hold a specific savings plan for retirement. Those who do, invest approximately €97 per month – or €1,161 annually.

This information came to light earlier today during the presentation of the Draft National Strategy for Retirement Income and Financial Literacy which, among other things, aims to improve the public’s awareness on pensions and enable them to make better informed financial decisions, including on investment plans.

The strategy, launched by Family Minister Michael Farrugia and Finance Minister Edward Scicluna, stresses on the importance of saving and investing for retirement. It will also help bring awareness about the income people will receive from their social security pension while answering questions such as whether an individual’s pension income will be adequate for the quality of life that person desires. If not, to what extent have they started to build their retirement savings nest egg so as to reach the desired quality of life after retirement?

“People tend to have gaps in knowledge about retirement, mainly because people tend to focus on the short term. The consequences of not thinking ahead about the impact of life-events – such as buying a new house or car, having children or getting married – can have on retirement planning.

Understanding the importance of planning for retirement alone is not enough. A person also has to be financially literate so that they make sure that the returns from the savings and/or investments accrued across different life-events and for retirement result in the financial rewards sought. Yet to do this they have to be knowledgeable on how the financial markets operate, the broad range of products they offer and the risks involved?”

The draft strategy proposes a vision and principles for addressing retirement income and financial literacy in Malta, and an action plan for the period 2016-2018.

The proposed vision is ‘Improving the personal financial well-being of Maltese citizens during life-events and retirement by enabling them to make better informed financial decisions that fit their circumstances. The strategy proposes as underlying principles that Maltese citizens: understand how the Social Security pension works and resulting impacts, understand the importance of saving and investing for one’s retirement, understand better than previous generations the range of complex financial management strategies, are more competent on how financial markets operate and with deciding on investment and savings products, are more aware of their rights and protections mechanisms.

The strategy will be up for an 8-week public consultation process lasting until 23 March.

Professor Scicluna said financial literacy has existed for many years but knowledge was still lacking. He spoke about recent cases of lack of information on private savings and retirements plans by both the selling companies and their customers.

Family Minister Michael Farrugia said the IMF recently praised the Maltese authorities for pushing forward the pension reform.  He said that armed with better knowledge people can make better informed financial decisions. In launching this strategy the government was making sure it went directly to the people instead of waiting for people to ask for help.

Dr Farrugia also announced that the pension increase announced in the budget will come into effect in the next few days.

 

 

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