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Don't rush pensions reform, social partners plead

Herman Grech, Timesofmalta.com

October 24, 2003

The social partners yesterday accused the government of suddenly rushing through its pension reforms after years of procrastination.

Though they believed it was inevitable, several of those speaking during a conference on pension reform organized by the Malta Employers' Association urged the government to refrain from drawing up its final proposals by the budget and to immediately embark on a serious consultation exercise instead.

A report drawn up by the chairman of the welfare reform commission, Joseph Schembri, was presented to the government on October 11 as the government signaled its intention to draw up a plan for pensions reform by the budget date, following consultation with the Malta Council for Economic and Social Development.

MEA president Paul De Battista said the government should start with the reforms in January 2005 and not a year earlier, as was being suggested.

"If you want a long term solution, you need consensus among the social partners," Dr De Battista said.

He said that raising the retirement age would signal the need for more jobs for first-time job seekers.

Furthermore, any pension reform should not increase further the financial burden on employers if they were to remain competitive.

Union Haddiema Maghqudin general secretary Gejtu Vella stressed that the social partners were not duty bound to reach agreement by the end of the year, even if the issue had to be tackled.

After "going on holiday", the government was now in a hurry to settle an issue of this magnitude in time for the budget, Mr Vella charged.

He said he could not understand the urgency of settling the matter when negotiating a collective agreement sometimes dragged on for longer than a year.

The president of the Confederation of Malta Trade Unions, Alfred Buhagiar, himself a member of the welfare commission, expressed concern that suddenly the government seemed determined to draw up a new pensions system in weeks without any real consultation.

The welfare commission had hardly met in two years and its members only met its new chairman 10 days ago, he said.

"They expected us to give reactions after a week and we told them this was not possible."

The commission is now meeting on November 1.

Labour social solidarity spokesman Marie Louise Coleiro said the issue of pensions and welfare sustainability must not be tackled simply by stressing just its financial disadvantages.

It had become convenient for some to present the issue merely from an economic and financial prospect and ignoring partly or completely the social impact.

Economist Gordon Cordina drew up a mathematical exercise to show that maintenance of living standards would be threatened in future by the demographic shifts.

He also pointed out that there were areas of low productivity and the female participation rate was below the EU average. There were also significant disincentives for older people to continue working.

One of the ways forward, Mr Cordina said, was to reform the pay-as-you-go system.

Richard Reid, managing director of HSBC Life (Assurance) Ltd, urged Malta to avoid making the same mistakes as the UK, which introduced complex pension systems borne with mis-selling.

On a positive note, Mr Reid said that Malta's regulations, coupled with the savings mentality of its people, meant that the island was well prepared to tackle the pensions issue.

In his usual colourful manner, Vince Farrugia, director general of the GRTU, Association of General Retailers and Traders, criticised those currently talking about pension reform and said that, with a month to go to the budget, nobody had drawn up a proper economic and social analysis of the pensions system.

It was useless deciding to rise the pension age to 65 when most self-employed could not keep producing at the same levels at that age, he said.

Mr Farrugia said it was ironic that while most of the country was discussing the way forward with pensions, the government was trying to make 900 drydocks workers take early retirement.

MEA director general Joseph Farrugia presented a survey conducted by the association among employers that showed that the majority of respondents believed that the best choice for their organization would be for employees to be given the "option" to work till 65.

More than half the companies replied that they would be prepared to consider retaining employees beyond the current retirement age on reduced hours.

Finance Minister John Dalli said the government did not intend to opt for cosmetic changes but for long-term solutions which, with everybody's contribution, "should be well thought through".

Some measures would be implemented at once and others would be introduced more gradually, Mr Dalli said.

While in Europe persons aged 65 and over represented 16 per cent of the population in 2000, in Malta this figure stood at 12.3 per cent. However, the speed of aging was expected to be high in Malta in the next 25 years. In fact, those aged 65 and over should reach one fifth of the population by 2025.

Spending on retirement pensions had increased by Lm9 million from 2000 to 2002.

Mr Dalli said that chronological age was no longer seen as an indicator of when a worker should retire. Functional age or working capacity was considered as a more appropriate indicator of an older worker's ability to cope with the demands of a job.

Studies showed that managers almost always underestimated the productivity of older workers. However, when compared with younger workers, older employees tended to be associated with a number of positive traits including low absenteeism, work attitudes, job skills and loyalty, the minister said.