Maltese reforms cut 2006 liabilities by €1.6bn
MALTA - Pension reforms introduced in 2006 to raise the state pension age from 61 to 65 between 2014 and 2023 have reduced pension liabilities by €1.6bn, according to figures from the National Statistics Office (NSO).
An update published by the NSO on the current value of pension liabilities to be paid in the future for the years 2006-2007, showed the accumulated benefit obligation at the end of 2007 was €10.9bn, or 201.6% of GDP.
The research is part of a pilot project from the EU’s Committee for Monetary, Financial and Balance of Payments Statistics (CMFB), which in June 2006 established a joint Eurostat/ECB taskforce to work on the compilation and statistical measurement of the assets and liabilities of pension schemes in the EU member states.
In the last year, the NSO confirmed it has been working with Freiburg University in Germany, a subcontractor for the taskforce, on evaluating the ‘accrued-to-date’ liabilities - which do not take into account future contributions or new pension accruals - for Malta as part of the final report to be published at a later date, but highlighted the project has also measured the impact of the 2006 pension reforms.
Data from the preliminary report by Freiburg University estimated the effect of increasing the state pension age to 65 will reduce the pension liabilities accrued at the end of 2006 by around 7% of GDP - equivalent to savings of approximately €1.6bn.
The research figures showed the liabilities, calculated on an accumulated basis, increased from €10.37bn at the end of 2006 to €10.92bn a year later - in social security terms - and although this produced a reduction in the percentage of GDP from 203.46% to 201.6% the university’s findings suggest the reforms have further reduced the 2006 liabilities to under €10bn.
Using the same data with a projected benefit obligation method - which takes into account wage increases and its effect on pension payment increases - the NSO revealed the liabilities increased from €11.53bn, or 226.25% of GDP, at the end of 2006 to €12.14bn, or 224.17% of GDP by December 2007.
Legislation to increase the state retirement age - which also extended the contribution period from 30 years to 40 years - was introduced in Malta in 2006, however while the same reforms allowed for the introduction of compulsory occupational pensions and voluntary private pension provision, this has not yet been implemented.
That said, in May 2008 IPE learnt the government planned to introduce these second and third pillar schemes in the next two years, as the law requires a review of the pension reform recommendations by the end of 2010. (See earlier IPE article: Malta knocks on door to pensions reform)
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