Do away with ‘all or nothing approach’ to early retirement pension system, say Malta Chamber & GWU

The Malta Chamber of Commerce, Enterprise and Industry, together with the General Workers Union, have come together to launch a set of proposals for Government in the area of pension reform.

Among its main proposals, the business-interest group and the workers’ lobby call for removing the current ‘all or nothing approach’ to early retirement, which states that should a worker opt for early-retirement at 61 “this person will not remain in any gainful occupation and has paid the stipulated contributions between age 18 and the date of retirement,” according to official Government policy.

The unions called for this approach to be replaced by a Flexi-employment approach, “which allows a person to balance their needs to opt-out of a 40-hour week whilst remaining active in the labour market.”

To ensure that such a Flexi-employment approach does not become an exit route from retiring at the statutory retirement age, it is suggested that this is governed by conditions that may include:

The pension to be drawn down should the person opt for early retirement at the age of 61 years of age whilst continuing to work pro-rated, for example, as follows:

• Retiring at 61 years of age, the pension income entitled to is pro-rated at 50 per cent.
• Retiring at 62 years of age, the pension income entitled to is pro-rated at 60 per cent.
• Retiring at 63 years of age, the pension income entitled to is pro-rated at 70 per cent.
• Retiring at 64 years of age, the pension income entitled to is pro-rated at 85 per cent.

A person who selects a Flexi-employment approach to retirement must work for a minimum set of hours established through a formal contract between them and their employers and employment registration with Job plus to benefit from the drawing down of the retirement pension.

Additionally, the groups say the current employer top-up incentive mechanism, “whilst proving to be successful, is based on a negative actuarial rate.”

They call for this to be replaced by a positive actuarial rate so that more persons are incentivised to remain fully active in the labour market and defer the draw down of their pension.

On Recommendation 14 presented in the 2015 national Strategic Review report that recommends the introduction of a mechanism to incentivise the deferral of retirement age so that a person aged 65 and over remains active in the labour market, this should be implemented by the Government – “albeit at a far more aggressively positive actuarial rate than proposed by the Pension Strategy group”.

The Malta Chamber and the GWU also all for the tax structure for senior citizens who receive income from continued post-retirement employment and pension income to be redesigned.

“It should come as an incentive rather than acting as a detriment to continued active employment.”

Both The Malta Chamber and the Union strongly underline that a carefully designed workplace pension based on the principles of opt-in on employment with the choice of opt-out is introduced in Malta.  Such voluntary opt-in on employment pensions schemes with the choice of an opt-out can be designed in a manner that creates no social tensions or adverse impacts on both employers and employers.  This can be achieved by adopting the following design principles:

• As is the case today, employers are nudged to contribute on behalf of their employees based on a fiscal incentive (that is, no mandatory contribution) and through collective bargaining.
• As is the case today, employers are nudged to contribute on behalf of their employees based on a fiscal incentive (that is, no mandatory contribution) and through collective bargaining.
• As is the case today, employers are nudged to contribute on behalf of their employees based on a fiscal incentive (that is, no mandatory contribution) and through collective bargaining.
• As is the case today, employers are nudged to contribute on behalf of their employees based on a fiscal incentive (that is, no mandatory contribution) and through collective bargaining.
• As is the case today, employers are nudged to contribute on behalf of their employees based on a fiscal incentive (that is, no mandatory contribution) and through collective bargaining.
• As is the case today, employers are nudged to contribute on behalf of their employees based on a fiscal incentive (that is, no mandatory contribution) and through collective bargaining.