During the past months we have watched France burn, Paris drowned in waste, workers, young and old, in their hundreds of thousands, together with their trade union representatives, protest against Macron across the length and breadth of France. The reason is the deeply unpopular bulldozing without a parliamentary vote of the pension retirement age by two years. In truth, the increase in the retirement age in France is not what Sir Humphrey Appleby would call a “courageous” decision.

Pension reforms are complex reforms. They are primarily directed to ensure that people have adequate pension income during ever-increasing retirement periods while the pension system offers inter-generational solidarity and remains sustainable. Decisions taken today will affect the quality of life of three generations of persons in the future, which is also true in the converse.

Pension reforms have different facets. They are architectural – how the system is designed regarding retirement age, contribution accumulation period and calculation method. They are gender-oriented – not least because the Malta Pay As You Go Payment (PAYG) is based on the model of an interrupted career over a long period: in our society, this continues to be the role played by males. It is demographic dependent: workers today pay for their parents' pensions, hoping that when they reach retirement, enough people are working to pay for their pensions. The labour market conditions them: the more active the population is, in terms of females, migrants, elderly and so on, the healthier the sustainability of the pension system.

The sustainability of a pension system is weakened when the period between a person's working life and the period they spend in retirement widens. And we continue to live longer. For this reason, the European Commission in its National Reform Programme incessantly recommends to the Maltese government that it introduces a longevity to retirement age automatic indexation mechanism so that as longevity increases, so does the retirement age.

Among other matters, pension reforms are invariably vote losers. Different cohorts of persons look at pensions differently, as do different generations. Living longer does not necessarily mean you maintain the same level of health as you age. The way a 55-year-old views retirement, and hence their retirement income, when retirement looms large on the horizon, is completely different from the view taken by a 25-year-old embarking on their career journey, where retirement is not even a blot on the landscape. Yet it is at the age of 25 and thereabouts that financial decisions taken in building a retirement nest egg are likely to have the most positive impact on their quality of life in retirement given that what makes a healthy retirement nest egg, to complement the contributory's pension, is compound and time.

I have had the privilege to lead pension reforms in Malta between 2004 and 2012 and to play a significant role in reforms between 2013 and 2021. I also had the privilege to draft and launch Malta's first national financial capability strategy and set up and lead Ġemma till late 2021.

The Malta Business Weekly has provided me with a weekly column to write about pension reform and other institutional and national reforms I was privileged to be involved in over a 40-year career. My discussion on pension reforms, of which this is the first in a series, will look at the issues that had to be faced, the options available to us, what I and other reformers considered to be the best way forward, the decisions taken by the politicians.

 

David Spiteri Gingell holds a an MPA. David was bestowed the Order of the Terra Mariana 4th Class (Estonia) in 2001. David held senior positions in government, the private sector and overseas, of which chairing the Pensions Working Group between 2004 and 2012 was one.

 

This article was published today in The Malta Business Weekly