The risks and challenges local companies could face should second pillar pension schemes come into place as part of a new legislation

Abstract

The aim of this dissertation was to determine whether the current Pay As You Go (PAYG) pension system is sustainable and the risks and challenges inherent in second pillar occupational pension plans should the legislation be changed and these will be adopted locally. While the first part of this study sought to establish the problems being faced by the current pension system in Malta and abroad, the research continued by evaluating alternative solutions in other types of pension pillars. Although there are four main pension pillars, this dissertation focused primarily on second pillar or occupational pension schemes by studying their impact in other countries and comparing the benefits and drawbacks seen in other countries with the benefits and drawbacks predicted by representatives of the local industry who were interviewed in this study. The findings from the interviews showed that representatives of the companies, insurances and unions used in this dissertation are in favour of such schemes as long as a strong and clear framework is established in order to protect small and medium sized enterprises. The need for such a framework is also needed when dealing with the problem of employee migration and movement of contributions from one employer to another. Most of those interviewed agreed that occupational pension schemes are a possible solution to the problems being faced by the PAYG system, but they can also help in employee recruitment and employee loyalty.