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JP Fabri Economist The pension reality we need to face 15 maltatoday | SUNDAY • 18 JANUARY 2026 OPINION THERE wis an uncomfortable truth at the heart of Malta's pension debate that is rarely stated plainly. Without foreign workers, Malta's pension sys- tem would already be under far greater strain. In a pay-as-you- go system, contributors matter more than rhetoric, and inward migration has played a decisive role in stabilising contribution inflows over the past decade. This is not an ideological claim. It is a mathematical one. The recently published Strate- gic Review On The Adequacy, Sustainability And Solidarity Of Malta's Pension System, makes this point clearly. Rising em- ployment and strong labour in- flows have delayed the full im- pact of demographic ageing and helped maintain contribution revenues at a time when fertil- ity rates have collapsed and life expectancy continues to rise. In effect, Malta has been given time. But time bought is not time solved. Migration has acted as a buff- er, not a permanent solution. Buffers, when misunderstood as fixes, often become the source of future shocks. The real risk facing Malta is not that for- eign workers have weakened the pension system, as populist narratives sometimes suggest, but that their contribution has postponed a necessary structur- al reckoning. At its core, the pension system is a claim on future output. Re- tirees do not consume money. They consume goods, services, healthcare, housing and care. Whether pensions are funded or pay-as-you-go, sustainability ultimately depends on how pro- ductive the economy is and how that productivity is distributed across generations. This is where the long-term challenge lies. Malta's demographic out- look is clear. Fertility rates are among the lowest in Europe. The old-age dependency ratio will rise sharply over the com- ing decades. Even under opti- mistic migration scenarios, the system faces growing pressure. Migration can smoothen the transition, but it cannot offset structural ageing indefinitely, especially in a small, land-con- strained economy. What matters, therefore, is how Malta uses the demo- graphic dividend it has been given. The review implicitly raises a deeper issue: despite years of strong growth and favourable labour market conditions, Mal- ta has not sufficiently strength- ened the non-state pillars of retirement income. The state pension remains the dominant anchor, while private pensions and long-term insurance prod- ucts remain underdeveloped relative to the scale of the chal- lenge. This is not simply a behav- ioural failure on the part of households. It reflects a broad- er structural reality. Long-term savings instruments have strug- gled to become mainstream. Financial literacy around re- tirement planning remains un- even. Occupational schemes are not yet the norm. Capital markets remain shallow. As a result, too much of Malta's accumulated wealth remains tied to short-term or illiquid forms, rather than diversified, income-generating assets that support retirement adequacy. The consequence is a system that leans heavily on the state at precisely the moment when the state's capacity will be test- ed by ageing, healthcare costs and fiscal constraints. This is where reform must become both firmer and more imaginative. Shifting to a multi-pillar pension system First, Malta needs to acceler- ate the shift toward a genuine- ly multi-pillar pension system. Auto-enrolment into private pensions is an important step, but it must be designed to de- liver scale, simplicity and trust. Fragmented schemes with high fees and complex choices will not change behaviour. Default options, low-cost funds and clear long-term mandates are essential if participation is to become widespread and mean- ingful. Second, Malta must strengthen the role of long- term insurance and retirement products as core components of household financial plan- ning. Insurance should not be seen narrowly as risk protec- tion, but as a vehicle for inter- generational smoothing and long-term income security. This requires regulatory clar- ity, product innovation and confidence that rules will not shift unpredictably over time. Third, labour market policy and pension sustainability must be linked explicitly to produc- tivity. Extending working lives can help, but only if those years are productive and well-remu- nerated. Skills, training and lifelong learning are therefore central to the pension debate. Higher productivity supports higher wages, which in turn support higher contributions and stronger private savings. There is no pension reform that can bypass this economic logic. Fourth, Malta must move beyond simplistic narratives around migration. Foreign workers did not create the pen- sion challenge. They alleviated it. The real risk lies in treating migration as a substitute for re- form rather than a complement to it. Managed well, inward migration can support growth and fiscal sustainability. Man- aged poorly, it becomes a brit- tle dependency. This is why the tone of the public debate matters as much as the technical solutions. Turning pensions into a proxy for grievance politics is eco- nomically illiterate and socially corrosive. It diverts attention from the real issues—demo- graphics, productivity, savings behaviour and long-term plan- ning. In this respect, the Pension Strategy Group's review de- serves genuine commendation. It is measured, evidence-based and deliberately forward-look- ing. It resists alarmism with- out indulging complacency. Most importantly, it situates pensions within a wider eco- nomic ecosystem encompass- ing labour markets, education, savings, insurance and growth. Malta needs more policymak- ing of this calibre. Risk of inertia The greatest risk now is in- ertia. Pension systems have a habit of appearing stable until they are not. When pressures finally surface, the adjustment required is abrupt and politi- cally painful. Malta still has the opportunity to act gradually, intelligently and fairly. But that window will not remain open indefinitely. The choice facing Malta is not whether to thank foreign work- ers or not. Gratitude is warrant- ed. The real choice is whether the breathing space they pro- vided is used to build resilience or squandered through delay. Pensions are not a problem for tomorrow. They are a mir- ror of today's economic choic- es. If Malta strengthens produc- tivity, deepens private savings, supports insurance and long- term investment, and treats migration as part of a broader strategy rather than a crutch, the system can remain sustain- able and equitable. If it does not, today's stability will quietly turn into tomor- row's crisis. Mature economies confront these realities early. Populist ones wait until they have no choice. Malta still has a choice.