The Malta Independent 19 April 2024, Friday
View E-Paper

‘Government not only guarantees pension but will also increase it’ – Michael Falzon

Andrea Caruana Sunday, 31 March 2024, 08:30 Last update: about 18 days ago

Social Policy Minister Michael Falzon Minister speaks to The Malta Independent on Sunday on his suggestion for a second, private pension to complement the one that the government will continue to give.

Could you clarify what you said on 6 March regarding pensions?

The context of the interview is important. I was attending a conference on Adult Financial Capability organized by ‘Ġemma’, which is under my jurisdiction, whose role is to guide the people on financial capability.

I am not saying that pensions will cease. I am only observing the realistic economic local and internation demographic i.e a decrease in birth rates, low fertility and an aging population.

ADVERTISEMENT

As Minister for Social Policy it is my job to promote the financial stability of the citizens and advise them to think ahead.

Why did you recommend a second, private pension?

I believe that to invest in your future is always good. A second pension is a bonus and ensures a better quality of life. We have even made efforts to promote a second private pension.

In fact, one may take a tax credit of 750 when paying 3,000 to a private pension. In short, it will not be taxed.

Specifically, how does the economy affect pensions?

Locally, we broke the record of the highest number of employed citizens and at the moment maintain the lowest ever number of unemployed. Our female participation is the highest in the EU, contrasting with 2013 when it was the lowest. Finally, since 2013, those depending on social benefits have been halved. This all goes to show Malta’s huge economic growth.

This allowed us to increase the COLA and pensions 9 times in a row. Furthermore, under a Labour government, the people have an assurance that pensions will continue to increase.

By law, we have a mechanism that ensures that every 5 years there is a strategic pension review group that must present a report to parliament. In 2010 it was projected that by 2060 the pension deficit would be 5.8% of GDP. But the last review in 2020, also forecast for 2060, revealed a deficit of 2% of GDP. This study ultimately shows that in the current economy, pensions are more stable and sustainable.

With reference to PN, in 22 years of government they never increased the pension, only the COLA. Furthermore, the Labour government is working to fix the anomaly made by PN in 2006 by which pensioners were split into those born until 1961 and those after. This created 2 classes with a discrepancy and ultimately unjust with regards to the pre-1961 group who had worked for 40 years. 

Regarding such economic uncertainties, would you say the social welfare state, historically championed by the Labour Party is being undermined?

Not at all. It remains strong.

Elaborating on risks towards the social welfare state, is free healthcare being threatened?

Firstly, one must keep in mind that social welfare includes education and social accommodation apart from healthcare. The allocated funds towards all these exceed 2 billion, that is 30% of total budget expenditure.

Furthermore, our country ranks highly internationally in its quality of healthcare. Ultimately, I don’t think there is any danger to free healthcare.

Can you give the number of citizens receiving pensions as well as those applying for them?

We are currently supplying over 100,000 pensioners; those who paid their N.I, age pensions and widow pensions. As well as disability pension which is incorrectly thought of as an allowance.

Collectively, these amount to 1.6 billion, as proposed by our budget.

Is a potential solution to economic instability found in increasing the MPI i.e 10% capping of worker’s N.I payments?

Currently, there is no need and neither is there a need to increase the pension age.

What if the citizen still cannot afford a private pension despite the government’s help?

The state pension will always be there. Government not only guarantees this but will also increase it.

Is your advice not in favour of private pensions companies?

I believe it would benefit the Maltese people more in the grander scheme of things.

Do you think it’s unethical to ask foreign workers to pay the full N.I when the likelihood is they won’t enjoy a pension in Malta?

I do not believe it is unethical because they are treated the same as the Maltese. If a Maltese person doesn’t contribute towards their pension they won’t receive it. And the same applies to foreign workers. If it was discriminatory or racist I wouldn’t agree with it outright, but I see no preferential treatment.

  • don't miss