Employers' Association backs pension reform, disagrees with removal of mandatory retirement age

The Malta Employers’ Association has expressed its support for proposed pension reforms, which is says are in line with its own suggestions, while also expressing its disagreement with the proposed removal of mandatory retirement age.

The reforms, initiated in 2007, reflect demographic changes that have brought about a transformation in the labour supply over the years particularly with respect to female participation, the number of foreign employees, and persons who continue to work beyond retirement age.

“The Association adds that this is also a result of the fact that the economy has managed to generate productive jobs to accommodate the increase in labour supply, even during the international recession,” the MEA said in a press statement.

It also agreed with the accreditation of contributions for persons pursuing life-long learning and to raise children, and suggests that this should be extended to persons taking care of elderly bed-ridden parents.

On the matter of payment of N.I. contributions by part-timers whose job is their secondary employment, the MEA proposed an evaluation of the possible increase in labour costs in industries with a high incidence of part time workers, and how this measure will affect employees who have a part time job in addition to full time employment, and who would thus already be paying the full N.I. in their full time employment.

“The Association expresses strong disagreement with the removal of the mandatory retirement age, arguing that it would be far better to retain the current system, whereby the employer and the retiring employee may enter into negotiations for a possible extension of employment with conditions – e.g. reduced hours - that are acceptable to both,” it said.

It argued that measures related to the deferment of pensions would probably not be effective in retaining people in the labour force beyond retirement, with the association suggesting that continued training, work-time reduction and job re-design to enable people to remain productive beyond retirement would be more effective means to achieve this objective.

The MEA also recommended that the Pensions Working Group look into the fact that with the introduction of the Guaranteed National Minimum Pension, the differential between the minimum and the maximum pension entitlement will be reduced.

“This could become a source of tension between those who would have contributed the minimum and those who paid the highest contributions throughout their career. Unless the ceiling is raised, eventually everyone will more or less receive the same first pillar pension irrespective of level of contributions paid.”

The Association reacted positively to the fact that rather than introducing a second pillar, the PWG is recommending incentives for more persons to invest in third pillar products.

“The position paper also accentuates that the adequacy of the first pillar depends not just on the levels at which it is set, but also extensively on individual choices, and mentions that many pensioners abroad are living in poverty because they do not own their property and are paying rent which eats into a good part of their pension.”

The proposal to set a Home Equity bank was welcomed by the Association, as it will allow retired persons flexibility in turning their fixed assets into cash if necessary.