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The Prime Minister decided not to divulge the contents of the World Bank report on pension reform in Malta before the June elections. One need not be an economist to guess the contents of such report: the non-sustainability of the present pension system, increase the retirement age, increase national security contributions by raising the pension on lifetime earnings rather than the best of the last l0 years for employees and the average of the last 10 years for the self-employed, and invest in an insurance policy.
I read that the report entitled. ‘The Malta Pensions System, An Analysis of the Current System and Options for Reform’ is now before the members of MCESD for discussion and evaluation alongside proposals prepared by the Welfare Reform Committee. It was also reported that the World Bank report notes that the current pension system suffers from both issues of fiscal non-sustainability and low pensions in the long run and it makes a number of proposals including raising the retirement age to 68 by 2072 and basing the pension on lifetime earnings rather than the best three of the last ten years for employees and the average of the last ten years for the self-employed.
I honestly do not know why the government had to revert to the World Bank when it already knows the answers for the sustainability of the pensions system. Usually, governments seek the assistance of the World Bank when they have the answer but they are afraid to take action and need a big brother whom they can rely for comfort when taking unfriendly measures with the electorate. The same happened in the case of the pension reforms in Malta: instead of the government looking for answers from within the welfare system by providing measures to ensure its sustainability, it looks as if it is opting for short term solutions.
Many have written about the pensions and the welfare gap and many suggestions have been made in line with government thinking, that is, increase the pensionable age and the contributions. Others have suggested other ways to increase revenue by having more people in employment and encouraging people to keep on working. There was also mention of abuse control but no pressure was made on the Government, so far, to control the abuse before speaking of a pension reform.
I am not an economist, but I am sure that if the Government takes a good look at the welfare system and tackles the abuses seriously, pensions will be sustainable and there will be no need for penalisation on us citizens because we are living longer. It is strange how longevity is regarded as punishment instead of a blessing, whereas the solution to low birth-rates is more taxes instead of incentives for the Maltese to have more babies.
So instead of embarking on a pension reform straight away why don’t we first introduce a sustainable welfare system? There are many ways of doing this: increase birth rates by providing incentives, allow unemployed married woman to choose to continue to pay contributions, allow married women who have temporarily stopped working during their children’s infancy, to continue to pay contributions, ensure that national insurance contributions are collected by the Department for Social Security, remove the anomaly between pensions of employees and self-employed persons.
Talk about bridging the welfare gap is plenty but little is said on curbing the abuse. So far the Government has been strong with the weak, and weak with the strong. Social Security benefits are issued without control. I know of instances where the Department issues benefits to self-employed on the basis of a profit and loss account written by the self-employed person himself on a piece of paper from a copybook and I can bet with the department that the majority of them all fall under the Lm4000 per annum income bracket.
There is nothing wrong with this. What is wrong is that the department is being very lenient in issuing social security benefits: they do not bother to check the veracity of these accounts, they do not check if the applicant has any property, any cars on his or his wife’s name, any boats or how many times they have been abroad. No checks are made whatsoever.
The recent trend is for spouses to separate so that they can receive double the amount of unemployment or other benefits. Spouses who separate and remain under one roof cannot be considered as separated. However, the Department is turning a blind eye and applies their contract of separation. If legally they have a right to remain under one roof even though they are separated, then the social security act should be amended so that in terms of social security benefits they will still be considered a married couple.
The same can be made in unemployment benefits invalidity rates and invalidity pensions. People who are registering for work have to go and sign up with the department of social security once a week and if they fail to do so, they lose their benefits for that week. However, I know for a fact that in many cases they are pardoned by the Employment Training Corporation when it provides them with an exemption so that they do not lose the benefit.
It is the same with invalidity rates and invalidity pensions. Statistics show that Malta has the highest rate of invalid people and surprisingly enough the rate rises before any general election. Unbelievable but true, people as young as 35 were issued with an invalidity pension.
Another way of curbing the abuse is to tackle directors of companies who are unemployed and receive unemployment benefits. Strange but true, there are directors of companies who received unemployment benefits. I cannot understand how in the IT era we are living in, the ETC does not bother to go through these companies and make the necessary checks with the VAT and the income tax department to check if they are in operation. It is known that there are directors of companies in the property and construction business who claim unemployment benefits.
May I again repeat that it is only when the Government shows that it means business when it states that it wants to curb the abuses in the social security system, can the unions start discussing with the Government, the World Bank and other proposals for a reform in the pensions system. What is the use of talking about reform when systems of abuse which can generate more income into the welfare coffers, are left unattended? If unions accept any pension reform without first ensuring that the Government has taken all means to curb the abuse, then such unions would be an accomplice in such abuse.
No discussions on welfare or pensions reform can be started without a commitment for no political interference in the control of abuse in our welfare system!
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