MALTA - Due to the vast number of small, family-run companies, second pillar pensions are unlikely to be widespread, said Albert Tabone, chairman of the Alliance of Pensioners' Associations.
Tabone said only 15% of companies would be capable of supporting an occupational pension fund.
“Most of the Maltese small and medium enterprises (SMEs) hire 10 employees or less, with several belonging to the employers family,” he said. “These people will not be willing to contribute any part of their earnings to a pension plan that will only benefit any outsiders hired,” Tabone continued.
Entrepreneurs have claimed they cannot take on any further financial burdens. Therefore Tabone doubted their readiness to fork out contributions for a pension plan.
“I am not being pessimistic, but realistic,” Tabone continued. He was not opposed to the pensions reform but believed the market must be examined before any introduction of second pillar pensions is considered.
The employment rate registers at 54%, which is still low compared to the 70% European average. “A better environment for the introduction of second pillar pensions could be garnered if these figures were to improve,” Tabone said.
The family and social solidarity ministry did not agree with these arguments and claimed that second pillar pensions could be the answer to problems in the state system.
Malta’s pay-as-you-go system is intrinsically linked with demography. “Solely strengthening the state pension would leave pensioners exposed to the demographic risk which could be diversified through a second pillar pension,” a ministry spokesperson said.
Anthoer reason lies in the laissez-faire attitude of the younger generations that feel the future is “too far away.”
To change this almost-complete dependency on the state one needs a culture shift, the ministry said. “A mandatory second pillar pension, where contributions paid are not taxes but savings through which a person is deferring disposable income today for the future, is key towards its resolution,” the spokesperson concluded.
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