Where the parties stand | Pensions

Back in 2004, the pensions working group - chaired by David Spiteri Gingell -concluded that reforming the system was essential to safeguard the adequacy of pensions in future and also because changing demographics (declining working population, greater longevity, falling birth rate) are putting pressure on the sustainability of the present system.

The group has come up with a three-pillar system: the first pillar, which is the two-thirds government pension with several proposed changes; the second pillar, where people will be obliged to put some savings into a private pension scheme; and an optional third pillar proposing tax incentives to encourage people to save in other pension schemes.

The proposals include some fundamental changes, among them the gradual increase in the retirement age to 65 and that the contribution period for the accumulation of the first pillar pension to rise from 30 years to 40.

The Pensions Working Group also proposed linking the pension age to life expectancy,

Subsequently, the first Gonzi administration introduced the first phase of pension changes in 2006, including raising the pensionable age to 65 for both genders by 2026 and lengthening the contribution period.

It had also changed the calculation of pensionable income from the best three years out of the last 10 years to the best 10 years from the last 40 years.

A guaranteed national minimum pension payable at a rate of not less than 60% of the median income for persons born after January 1, 1962 had also been introduced.

In 2006, then social policy minister Dolores Cristina said that in her personal opinion, second pillar pensions should be introduced "sooner rather than later", adding that the government's position was that the second pillar introduction was a matter of "when, and not if".

In 2007, the medical review for invalidity pensions was made more rigorous and, following the 2008 Budget, pensioners were allowed to keep on working without any reduction in the pension while paying social security contributions.

Labour opposed a minor increase in NI contributions for higher income earners foreseen in the 2004 reform when this came in force two years ago.

But 10 years later, Malta still has not introduced a mandatory second pillar.

In February 2012 the European Commission called on Malta to accelerate its pensions reforms that had started in 2006.

In a White Paper on the issue, the EU Executive stressed that Malta should move fast in raising the retirement age and encouraging private pensions schemes.

At the same time, the Commission recommended that the island should stop promoting "early retirement schemes" as these worked against the prevalent target to increase the employment rate among older workers in Europe.

The EU has no remit when it comes to pensions, as this is Member State territory, according to the treaties. However, the Commission yesterday insisted that it wants to support pension reforms in member states as time is running out.

Malta has one of the lowest employment rates in the 55-64- year-old category, with just 30.2% of them being in employment in 2011. This means that less people are contributing to the pensions of older people.

Despite the imminent pension time bomb of the three political parties, only AD makes a reference to the need of a second pillar in its manifesto. On its part, the PN proposes an innovative idea of a pension fund for every newborn, in which the government would deposit €1,000 in a bid to encourage private savings.