4 - 10 May 2000

Gonzi says private pension schemes not the only solution

by David Kelleher

Pensions schemes are but part of a package solution for Malta's pensions problem and not the only solution, deputy prime minister and minister for social policy, Dr Lawrence Gonzi, said.

In an interview with IQ Magazine, issued with today's The Malta Business Weekly, Dr Gonzi said: "There are already a number of schemes on the market, including private pensions schemes. There are systems that indirectly encourage or force people to take out an insurance policy, for example life insurance. These schemes are used by individuals to guarantee a sizeable income if something happens to them or their families.

"We are not starting from scratch as if we did not have anything in place. Yet whoever thinks that the solution to our pension problems is by turning to private pension schemes, he is mistaken. It is a question of sustainability: how, as a country, will we be able to pay all these benefits and welfare?" Dr Gonzi told IQ Magazine.

The deputy prime minister said that the government could encourage people to take out pension schemes but then who would have to pay the premium? "Will the individual have to fork out an extra sum of money apart from the National Insurance contributions? Or will this premium be deducted from his annual NI contribution and passed on to the insurance company?" Dr Gonzi said.

"If this is the case, from where is the government going to recoup lost revenue to pay for today's pensions? If the NI funds are reduced drastically because a considerable part is passed on to private insurance companies, how is the government going to pay those who do not have a private pension? This shows that encouraging private pension schemes is not the solution."

Dr Gonzi said that private pensions schemes helped individuals to increase their income and security in old age, but they were not the only solution to the country's pensions problems.

"What we are worried about are those who cannot afford to pay the premiums. What about them? We must focus on this sector of society as well," Dr Gonzi said.

As to the urgent revision of the present contributory retirement pensions scheme, Dr Gonzi said that there were various methods and ways of doing so.

"These range from simplification of the procedures used to hand out payment to drastic reform. The role of the Welfare Reform commission is exactly this: to find suitable remedies.

"I feel that we must carefully re-examine the use of one single social contributions fund. One option is to divide that fund into two. One part would be solely used for pensions and the other for the other social benefit, such as health and invalidity benefit.

"Thus money could be allocated to either fund depending on the situation and exigencies of the system," he said.

Asked why the government never enforced the employers liability legislation, Dr Gonzi said he did not know why such a formality had never been finalised.

"The law was passed in 1979 but is still awaiting the President's signature so that the law can be enforced. Personally, I have no idea why it was never signed. However, I feel that it is time that something should be done, and as soon as possible. Such a law is in everyone's interest: the government, the social partners who protect workers' interests and workers themselves," he said.