Issue link: https://maltatoday.uberflip.com/i/960495
maltatoday SUNDAY 1 APRIL 2018 Interview 16 By Raphael Vassallo The National Pensioners Association recently came out with a number of demands, including: that the National Minimum Pension be calculated on an 'equivalised' (as opposed to individual) basis; that the long-standing 'Service Pension' anomalies are finally ironed out; and that 'pensions should be related to National Insurance contributions'.. among others. And yet, I was under the impression that several of those demands have already been met. 'Equivalised pensions' is one of the platforms of the proposed reform; and aren't pensions already based on NI contributions? Isn't that the reason why we pay NI in the first place...? CARMEL MALLIA: It used to be. That is how the system was de- signed, and how it used to work... before it was butchered beyond recognition. What happened, in a few words, was that the original pension model was tinkered with it here and there over the years, until it eventually got completely messed up. If we followed the origi- nal model, pensions should be cal- culated on how much NI has been paid. Ours is supposed to be an 'income-related insurance' model – which means you pay 10% of your income all your working life, and then receive two-thirds of what you paid, up until the point at which it is capped. LOUIS CILIA: And let's not for- get that our original model was based on the British welfare sys- tem, which was drawn up in the 1940s precisely to ward off poverty on a large scale. It was a successful system, too, in that the sort of pov- erty you saw before the war, doesn't really exist in most parts of Europe anymore. And this is precisely why we feel concerned: the resolu- tion we adopted at our last AGM was sparked, in fact, by a concern common among all our members: that the current pensions situa- tion is driving more people towards poverty, instead of the other way around... CM: But let's start from the be- ginning. As someone who has al- ways worked in social services, the first priority I would address is pov- erty. It's no use starting with peo- ple higher up the ladder; you have to look at the bottom rungs first. Take the National Minimum Pen- sion, for instance. To me, that has to be the starting point. Social ser- vices are there to provide a safety net. They are not much use, if the net is so full of holes that everyone keeps falling through. Today, we have a National Minimum Pen- sion that used to provide a safety net... but now, with inflation, rent, increasing cost of medicines – it is no longer serving that purpose. It is obsolete.... How does this national minimum pension work out in practical terms? Is it true that pensioners are expected to survive on as little as 500 euro a month? LC: Today, a retired couple, in which only one receives a pen- sion, gets 150 euro a week... which goes up to 170 euro with bonuses, etc. But that's if only one receives a pension. There are many cases where couples both independently receive a pension: those are not as badly affected. We are talking more about those cases where a retired couple has to rely only on one pen- sion... I'm assuming there must be quite a few couples in that category.... considering that 'working women' were considerably fewer in number in years gone by... CM: There are many in that cat- egory, yes. Their disposal income is around 170 euro a week. Now: this is what we meant earlier by 'equivalised' income. If we are to be realistic in the way we calcu- late statistics, you have to take all members of the household into consideration, not just the one who is directly entitled to a pension. Ac- cording to government's own cal- culations, the safety net can only be maintained if we stick to a mini- mum pension of 60% of the 'equiv- alised' national income... which, in the case of a single, works out at 157 euro a week... but in the case of a married couple, it's supposed to go up to 235 euro. Yet married couples still get only 157 euro... because government has agreed in principle to the 'equivalised' argu- ment, but hasn't introduced it yet. According to the proposed reform, this will be applied in full only by 2027. [pause] 2027? What good will that be, to people who can- not wait that long? Meanwhile, it will be gradually increased... but we are still at the levels I just de- scribed. And let's not forget what this '60% of national income' is all about. It represents the minimum that we all agree is required not to fall through the holes in the safety net. We are all agreeing, then, that anyone who gets less than that amount, is going to fall through a hole. But what is actually happen- ing? Government has established a minimum pension to prevent that from happening, yet it is still not paying out what it describes as the 'barest minimum' just to survive. So how are people expected not to fall through the net? This is precisely the part I'm not getting: government has already agreed, yet it is still not paying out what it has agreed to pay. Why not? CM: Because there's no money; or so they say, anyway... but it's not true. What about the surplus? What about all the prosperity, the economic boom, and all that? The truth is that we are living an illu- sion... the wealth is there, but it's not trickling down to everyone. It's certainly not trickling down to us... Meanwhile, this also touches on the NI question I asked at the beginning. Those who get the national minimum pension, will have presumably paid the lowest NI contributions... CM: No. This, in fact, is the extent of the absurdity we have fallen into. What was supposed to have been a 'minimum pension', based on the lowest NI contributions, turns out in practice to also be the maximum pension received by those who have paid all their NI contributions in full. We have turned the entire system upside down: Now, we have reached an extremity where the capping of pensions yields the same result for those who paid more in NI contributions, and those who paid less... this, alone, has broken the system. Any form of insurance pays out on the basis of the premi- ums paid. Otherwise, the system can't work... And if I'm understanding correctly: to compound matters, the 'equivalised amount' received by high and low NI contributors alike represents only the 'barest minimum' to avoid poverty... LC: To have said everything, however, government has agreed to introduce equivalised pensions by 2027. And it has given out a bit in the meantime. Now: we are not unrealistic, and we're not expect- ing government to simply dish out the full sum immediately. But 2027 is too far away. We would like to see this measure implemented, at least, by the end of this legislature. But the real issue of concern to us is: is it possible, in this day and age, for pensioners to cope with current expenditure... involving payment of goods, services and rent? CM: Rent alone is crushing them now. If you live on 700 euro a month, and your rent is 300 euro – to mention what is today consid- ered a 'low' rent – your disposable income is going to be 400 euro a month. How can people be expect- ed to survive on that, and not be considered 'at risk of poverty'? We keep using the term 'at risk of poverty'... but to quote the late Charles Miceli: "In my experience, I do not encounter 'people at risk of poverty'. I encounter people who are poor". Would you agree with that as a description of the current plight of pensioners? CM: I am concerned about cur- rent pensioners. What is going to happen to us, the people who are pensioners today? Many of us might not be poor... but many us feel that we are moving towards poverty. The Pensions Act states that social security pensions must be revised annually, to reflect cur- rent salaries/wages, or new col- lective agreements. With capping, however, that is no longer hap- The truth is that we are living an illusion... the wealth is there, but it's not trickling down to everyone. It's certainly not trickling down to us... What is going to happen to us, the people who are pensioners today? Many of us might not be poor... but many us feel that we are moving towards poverty ILLUSION POVERTY A safety net full of