Toon this week: Ageing disgracefully

Calling for action

As we persist in endlessly paying lip service to Malta’s looming pensions dilemma, the problem itself continues to grow day by day as Malta’s population itself ages by the day.
We must emphasise, once again, that the time has come to take concerted action against the pensions menace through concrete actions.
Real, logical discussions between the government, the unions and business must commence without further delay lest the ominous conundrum grows beyond all solutions, save the most painful. Now is the time for action, while the issue can still be tackled in a fashion so as to reduce the prospective burden on the state and taxpayer alike.
Of course, at the end of the day the issue is a social one. But it must be approached with a business-like attitude. After all, what better way to deal with such an emotive issue than with a business mindset reinforced by social consideration?
But whatever the solution put forward, the one quality it cannot lack is a visionary element. Visionary in the sense that today’s pensions decision makers must be able to envisage Malta’s socio-economic structures over the decades to come. This is, of course, no simple feat but it is one that, through proper dialogue, can nevertheless be achieved. However the problem is addressed in the end, today’s decisions will undoubtedly affect generations to come.
By now we are all-too-familiar with the problems before us and the many so-called solutions presented by armchair and real economists alike. And there is little doubt that the end solution will incorporate private pension schemes to some extent. The answer could take the form of a three tiered approach – whereby the oldest pensioners would remain on state pensions, the middle-aged worker would be presented with a combination of state and private pensions and with the newest segment of the workforce taking more of the private pension schemes. In the same vein, a minimum state pension could be proposed, with tax incentives being offered for private pension scheme holders.
Now with the institution of a special funds act for pensions, paving the way for occupational private pensions schemes, this area of the market is expected to begin growing – reinforced by the finance minister’s recent strong words on the subject. But these words have so far failed to be realised into concrete steps.
However, there are the inherent problems here as well and a strong regulatory framework must be instituted if we are to avoid the debacles the UK has been riddled with in this respect.
Another matter worthy of due consideration is the fact that if private pensions schemes are to be created for the Maltese market, the Malta Stock Exchange must be broadened and deepened through the injection of more liquidity so as to create a market suitable for these pension products to diversify in. Otherwise, local pension schemes would inevitably invest in foreign markets, which would see copious amounts of Maltese funds leaving the country.
Further developing Malta’s Exchange is of the utmost importance for the future viability of private pension schemes, a market must be created for these products by the introduction of a wider array of investment tools in respect of both bond and equity products, in tandem with developing new pensions legislation and meaningful dialogue.