An analysis of scenarios to reform the Maltese pension system

Abstract

This research study was undertaken to explore how different scenarios might impact pension sustainability and pension adequacy in Malta. The aim was to give recommendations that can aid policy making with regards to pension in Malta. A mathematical model as well as semi structured interviews were used to answer the research question - How can the adequacy of Maltese pensions be improved while maintaining their sustainability?

It was found that the current pension system will experience a decline in both sustainability and adequacy in the future. Raising the pension age would improve sustainability but have no real effect on pension adequacy. This scenario however, presents a number of risks to implement. Distributing a flat rate pension top up would increase adequacy of the pension for low income earners but have a minimal effect on high income earners. Furthermore, such a measure would decrease sustainability. Furthermore, a number of other factors could have an effect on pension adequacy such as financial literacy education and promoting alternative funding sources to the state pension. It was also noted that pension reforms should also focus on addressing the new social scenarios being experienced today.