Issue link: https://maltatoday.uberflip.com/i/659044
3 maltatoday, WEDNESDAY, 30 MARCH 2016 News Government plans voluntary second pillar pension scheme TIM DIACONO THE government plans to intro- duce a voluntary and incentivised second pension scheme, finance minister Edward Scicluna an- nounced. "We want to promote both sec- ond pillar and third pillar pension schemes," Scicluna told a core group meeting of social partners and MEUSAC representatives. "While any such scheme will be voluntary, we will provide em- ployers with fiscal incentives to establish them." Scicluna's announcement repre- sents a U-turn for the government, which had previously warned that 'second pillar' occupational pen- sions would cripple lower-income families. The second pillar scheme, which has been championed by the Op- position, would require employ- ers to place a percentage of their employees' monthly income into personal pension accounts. Prime Minister Joseph Muscat had previously rejected the sec- ond pillar proposal, on the ground that there would be people who would not be able to carry on liv- ing decently while dedicating a portion of their income towards a pension fund. Scicluna was addressing the core group meeting ahead of a closed discussion on Malta's National Reform Programme for 2016, which presents the government's policies to reach its set EU2020 targets. This year's programme is due to be submitted to the Euro- pean Commission by mid-April. The finance minister said that the government has adopted a long-term strategy to gradually in- crease pensions, bearing in mind their weight on public finances. "Of course, I understand that current pensioners are only inter- ested in the present, but we must speak in terms of long-term sus- tainability," he insisted. "We don't want the deficit to explode as a result of higher expenditure on pensions." He similarly dismissed calls for the state to instantly distribute wealth more fairly, warning that government revenue has not yet reached a high enough level. "The reality is that government revenue has not yet reached a high enough benchmark for wealth to be distributed fairly in a smooth manner," he said. "Above all, Mal- ta must maintain its competitive- ness, at a time when competition by other Mediterranean nations such as Cyprus, Greece, and Spain is growing fiercer. This is a deli- cate topic, but if Malta loses its competitiveness, then it will soon lose everything and government revenue will plummet." Malta registered a historic 6.3% economic growth last year, with its GDP amounting to €8,796.5 million. However, Scicluna not- ed that this was largely due to a 21.4% increase in gross fixed capi- tal formation – due to the sudden launch of several EU-funded pro- jects ahead of the deadline to tap into the structural funds. Scicluna admitted that the gov- ernment must step up its game on research and development, which must make up 2% of Malta's GDP according to EU2020 targets. It currently only makes up 0.4% of GDP. "2% of the GDP is an ambitious target, but we must reach it if we want Malta to reach a pla- teau of high and sustain- able economic growth. After all, research and development are as- sociated with modern countries." The Nationalist Party welcomed the decision to consider the introduction of a second pillar pen- sion. "The Opposi- tion had formally called for the con- sideration of the second pillar pen- sion in its Pre-Budget Document published last year and reiterated such call on a number of occasions afterwards. This position was taken following an analysis of the recommendations that had al- ready been made by the European Commission and the Pensions Working Group," deputy leader Mario de Marco said. "Regrettably, the government had been taking a very populist approach to the responsible call for a second pillar system, without offering any sound alternatives to ensure the sustainability and adequacy of pensions for future generations. "However, in the con- text of the need to en- sure the sustainability of our pension sys- tem in the context of the challenges posed by an age- ing population, the Opposition welcomes the Government's decision to fol- low the Oppo- sition's proposal and its consequent change of heart and looks forward to a fruitful discussion on the matter." Social spending up by €15 million over 2014, drop in dole beneficiaries MATTHEW VELLA TOTAL social security benefits amounted to €868.4 million in 2015, ref lecting a 1.8 per cent in- crease when compared to 2014. The increase in expenditure was due to a €22.6 million rise in Contributory Benefits outlay. On the other hand, Non-Con- tributory Benefits expenditure decreased by €7.1 million. The Contributory Benefits out- lay amounted to €668.2 million, 3.5 per cent higher than in 2014. The rise in outlay was mainly due to a €20.4 million rise in Pen- sions in respect of Retirement. Conversely, Non-Contributory Benefits decreased by 3.4 per cent during 2015, totalling €200.2 million. A €9.7 million decline in Chil- dren's Allowance was the main reason behind the decrease, due to an extra payment being effect- ed in 2014. In the fourth quarter of 2015, the outlay on social security ben- efits increased by €6 million, to €220.4 million. A rise in outlay was recorded for Contributory Benefits (€7 million) due to a €6.3 million increase in retirement pensions. On the other hand, Non-Con- tributory Benefits expenditure declined by €1 million following a similar decline in social assis- tance outlay. Social Security beneficiaries In 2015, Social Security Con- tributory beneficiaries consisted mainly of people earning two- thirds pensions (43,432) and sick- ness benefit (19,346). When compared to 2014, Two- Thirds Pension beneficiaries increased by 2,109, while Unem- ployment Benefit recorded the highest decline in beneficiaries, down by 663. In the Non-Contributory Ben- efits category Children's Allow- ance and Supplementary Al- lowance registered the largest cohorts of beneficiaries in 2015 with 43,246 and 24,891 respec- tively. The largest increase in beneficiaries was recorded under Unemployment Assistance Taper (1,513), while the biggest drop was in Social Assistance (3,044). The one-time Child Supplement Benefit was disbursed to 13,976 beneficiaries, whereas the new In-Work Benefit was paid out to 1,359 persons.