Retirement age to remain unchanged in pension reform

The pension reform strategy group appointed by government has concluded that the time is not ripe to increase the retirement age from 65 and the social security contributions from 10% while third pillar pensions will not become obligatory.

The Pensions Strategy Group headed by the permanent secretary within the ministry for family and social policy Mark Musu today put forward 27 recommendations which among others propose an increase in contributions credited to parents who take temporary breaks to raise children. Similar credits will be available for people who hold tertiary education qualifications. 

“This does not mean that reforms are not needed but we must look at long-term challenges to ensure sustainability,” Musu said during the launch of the strategy.

Interestedly, the report also proposes a consultation process on the possible abolition of the mandatory retirement age within the Malta Council for Economic and Social Development.

Noting significant demographic changes in recent years, the strategy group stressed the importance of maintain stability in the ratio between the number of years contributing to those drawing a pension.

The group proposed the creation of a special body to regulate the required contribution period to receive a full pension every five years, which should be announced 15 years in advance.

Looking forward to national debate on pension proposals. Common ground for sensible changes, rewarding work and protecting the vulnerable-JM

— Joseph Muscat (@JosephMuscat_JM) June 17, 2015

The document launched today recommends that the first tightening between the contribution period and a person’s working life should be introduced in 2016, affecting those born between 1965 and 1969. The group recommended that the contributory period for this cohort should increase from 40 to 41 years.

The recommendations also include the removal of the ceiling on the payment of contributions by people aged 65 or more who remain active in the labour market and facilitating the transition of workers from the shadow to the formal economy.

Opening this morning’s debate, social dialogue minister Helena Dalli said government was looking at introducing wholesome reforms including pensions, childcare, and migration.

While underlining the importance of encouraging women to have children, Dalli said that the country needs to strengthen its workforce to ensure that pensions are sustainable. 

Another recommendation included in the strategy proposes incentives to remain active in the labour market. People who remain in employment between the age of 62 and 65 without claiming pension could receive a 2% top up in the first two years and a 4% top up in the other two years. This will constitute a permanent increase in the person’s pension income.

At present, only those born on 1962 or later are entitled to a guaranteed national minimum pension and the strategy proposes that between 2017 and 2026, the Guaranteed National Minimum Pension should increase by the full COLA for that year plus any difference between the full COLA and the income level resulting from the application of an indexation of 50% wages and 50% inflation for people aged between 65 upwards. 

The Guaranteed National Minimum Pension would increase cumulatively on the basis of the full COLA plus any difference between the full COLA for that year and the change in the maximum pension.