Question: How true is it that there is a pensions crisis?

Answer: The current pensions system, established in 1979, is based on a so-called Pay As You Go system. What this means is that people working today pay contributions that finance today's pensioners. People working today are therefore not investing their contributions for their own pensions.

In the future our population will be affected as follows:

People who are 60 and over today stand at 18%
In 2020 these will increase to 25.7%
In 2050 these will increase to 31.2%

At the same time the population today stands at 389,000
By 2035 this will decrease to 369,900
By 2050 this will decrease to 333,800

People are living longer,
Men over 70 today have a life expectancy of 10.9
By 2022 this will increase to 12.2
By 2032 this will increase to 12.9

Women over 70 today have a life expectancy of 14.2
This will increase in 2022 to 16.2
This will increase in 2032 to 17.1

Life births are falling,
This stood at in 1944 39.3
This stood at in 1980 17.6
This stands at in 2003 10.03

It clearly follows that there will be far less people in the future to pay contributions to support their pensioners. The money to finance pensions as they stand today will simply not be available.

There are two other concerns. First, a retirement pension is based on two thirds of a maximum income ceiling of Lm6,750. This ceiling was established in 1987 and has not changed since then. Due to inflation and increased living standards, the monetary value of Lm6,750 has been steadily decreasing and is considered to become inadequate for the future.

Second, the PAYG system is the only pension system in Malta. This has falsely created the belief that by paying social security contributions one is fully providing for his or her future. This is not entirely correct. The current pension system only provides at most a pension on two-thirds of the Lm6,750, that is Lm4,500. Given today's living standards, unless a person saves for his or her future this maximum pension entitlement will not be sufficient to allow a person to live at the same standard of living he or she was accustomed to prior to retirement.

These concerns relate mostly to future pensioners. We are still in time to take measures and make changes in a smooth way. This is the idea behind the White Paper issued by government.

If no changes are made, future pensioners will face a problem. This means that if we decide to avoid making changes now a future government will have to make harsher changes.

Question: What are the available solutions to reform our pensions system?

Answer: The options are:

•  No change: which will mean the future pensioners will become poorer in relation to the rest of society

•  Increase taxes or the social security contributions paid.

•  Increase personal savings.

•  Change the formula of the current PAYG pensions system.

•  Rise the statutory retirement age.

We consider the first option a non-option. In terms of the other three options, a balanced mix of the different solutions is being recommended to provide for a smooth process of change.

Question: What is being proposed?

Answer: The proposal for discussion recommends that the current pensions system (called the First Pillar) is supported by a Second and Third Pillar respectively

The proposed Second Pillar seeks to encourage a person to save for his or her retirement. This can be by means of voluntary or compulsory savings. The Third Pillar is a measure that gives an individual the freedom of choice to invest as much as he or she wishes for his or her retirement. Both the Second Pillar and the Third Pillar are intended to get people to increase savings to enhance their quality of life during retirement.

The proposals also recommend that everybody should continue to pay their social security contribution on the two-thirds pension but proposes a number of changes to how the pension under the current system is calculated. An important recommendation is that Government should make a minimum pension guarantee that is linked to inflation to ensure that no person will become socially excluded.

The retirement age is proposed to increase to 65 years for both men and women. No changes are being recommended to increase taxes or the contribution rates of the two-thirds pension.

Question: How is the increase in retirement age to be introduced?

Answer: The retirement age today is 61 years for men and 60 years for women. Given that men and women are living longer and given that the population will decrease, the proposal is for the retirement age to increase to 65 years of age for both men and women.

The increase to 65 years of age is proposed to be staggered as follows:

(i) As from 1 st January 2007 women will starting retiring at the age of 61 years.

(ii) From 1 st January 2007 the pension age will increase as follows:

55 years of age and over No change

52 years of age to 54 years of age 62 years

49 years of age to 51 years of age 63 years

48 years of age and below 65 years.

Question: Government is saying that there is a problem and that changes need to be introduced. There is a school of thought that believes that there is no problem and that there should be no changes. What is the truth?

Answer: The debate on whether pensions is an issue was embarked upon by different governments. It's pertinent to state that between October 1996 and September 1998, the government at the time commissioned two reports to review the pensions' situation.

The first report was commissioned by then MCED with the participation of Government. In fact a committee was set up in December 1997, which included the Office of the Prime Minister. The committee was chaired by Mr Reno Camilleri.

In early 1998 the then Government, supported by sponsoring insurance companies Middle Sea Insurance Ltd and Mid-Med Life Assurance commissioned an international firm of actuaries and consultants, Watson Wyatt Ltd, to prepare a report on pension provision in Malta – which was presented to the government in August 1998.

Both reports (available on www.pensions.gov.mt ) concluded that:

(i) the current pensions system is not sustainable in the long term;

(ii) that the adequacy of the retirement pension will be seriously eroded over time.

Both reports proposed changes to the current pensions system, such as:

(i) the retirement age should be raised

(ii) that the concept of ‘self-help' must be inculcated and that, in this regard, a Second Pillar should be introduced; and

(iii) the reckonable period for establishing the average earnings on which a pension is calculated needs to be reviewed.

In February 1998, the Forum for a Better Economy established by the Government at the time issued a paper titled ‘Value 2000: Focusing Resources for Superior Competition'. The Value 2000 paper recommended that the social security system should adopt a flexible approach that includes self-help, mutual help and public help – with self-help and the need to foster independence being as the major challenge.

The recommendations of studies commissioned by the Government at the time, whilst perhaps varying in detail, in terms of their conclusions and principles for recommendations are consistent with various studies commissioned by this Government since September 1998; including the White Pape published for discussion in November 2004.

Question: Given that I will have the opportunity to invest in a Second Pillar and Third Pillar pension scheme does this mean that I can opt out of the Two-Thirds Pension?

Answer: The White Paper recommends that you will not be able to opt out from the Two-Thirds Pension, that is the First Pillar, because this is the main mechanism that ensures solidarity between workers and pensioners, between the well to do and those on the fringes of society. The Two-Thirds Pension must continue to re-inforce this principle, which is the basis of the social safety net, to ensure that no one faces social exclusion in old age.

Question: What changes are being proposed to the Two-Thirds Pension?

Answer: Four major changes are being proposed. These are:

(i) The current contribution accumulation period for a Two-Thirds Pension is today 30 years. This does not correctly reflect a persons' work career. A person who joins the labour force today following the completion of secondary, upper secondary, and tertiary education will meet the thirty year contribution period at 46, 48 and 51/2 years of age respectively.

Given the proposed increase in the retirement age to 65 years, a 40 year period is a fairer reflection of a full career, and the contribution accumulation period should therefore be increased to 40 years. The implementation of this recommendation will be introduced in a staggered manner and in proportion to how close one is to retirement.

(ii) The Two-Thirds Pension for employed persons is currently calculated on the basis of the best three consecutive years out of the last ten years; and the average of the last ten years for the self-employed.

This calculation basis raises a number of issues such as, discriminating between the self-employed and employees; the danger that it may place pressures on employers to increase an individual's wage in the last years of employment. As experience has shown, it can also prompt individuals to under-declare their income throughout their working life and then increase it when they near pension age to obtain a full pension.

The White Paper thus recommends that the base line for the calculation of the Third Pillar Pension is increased to 40 years.

The White Paper however recommends that the increase in the accumulation period is introduced gradually – in proportion to how close one is to retirement.

(iii) The Maximum Pensionable Income (MPI) of the Two-Thirds Pension is Lm6,750. This has not changed since 1987. This means that a person who retired in 1987 and a person who will retire today would have obtained the same MPI ceiling. However, the purchasing value since 1987 to-date has been eroded over the said period and our quality of life has been dramatically improved.

The White Paper recommends that this situation should be changed. The White Paper does not recommend that the MPI is increased as this will have a negative impact on the cost to business as well as on disposable income as a higher contribution would have to be paid.

The White Paper however recommends that the MPI should be calculated in accordance with inflation to ensure that a pensioner who will retire in twenty years time, will in terms of purchasing power attain a pension that will have the same purchasing power of a person who retires today. This will result because the White Paper recommends that the inflationary adjustment to the ceiling of the MPI will be cumulative.

(iv) The post retirement pensions income is today based on a formula that includes the Cost of Living Allowance and wage increases.

The White Paper argues that a wage increase indexation is subject to market and economic behaviour. There is no guarantee that wages will increase automatically or at a high rate; or that they will increase at all. Moreover the Cost of Living Allowances are not always given or for the matter given at the same rate.

Nevertheless inflation will to some degree always occur in a healthy economy. Thus the White Paper argues that indexing the post retirement pension income to inflation is the best way to safeguard the value of the purchasing power of the post retirement pension.

Question: What will remain from the current Two-Thirds Pension?

Answer: The following are parameters that will not change from the current Two-Thirds Pension:

(i) The contribution to be paid by employees and employers for workers and by the self employed will remain the same to the maximum ceiling of pensionable income: Lm6,750 – that is 10% by either party. It is pertinent to state that as the maximum pensionable income increase by inflation, the amount of contributions paid will increase accordingly.

(ii) The social security contribution and the Two-Thirds Pension entitlement will continue to be calculated on the basic wage or salary capped to the MPI ceiling.

Basic wage or salary means the wage earned exclusive of overtime, allowances, fringe benefits and other employment related income.

(iii) The target pension for a full career will continue to be two-thirds of the basic wage.

Question: Will a minimum pension be maintained?

Answer: Yes. The White Paper recommends that the Two-Thirds Pension should be directed towards guaranteeing a minimum decent standard of living to prevent social exclusion.

Moreover, the White Paper recommends that the determining of the minimum pension guarantee should not be a one-off exercise. Rather the White Paper recommends that the minimum pension guarantee should be adjusted annually to protect its purchasing value against inflation.

The White Paper recognises that some people will be exempted from paying their contributions due to reasons such as unemployment, illness, etc. With regards to such persons the White Paper recommends that there should be an automatic ‘top-up' mechanism to ensure that such persons will be assured the minimum pension guarantee and thereby social inclusion.

Simultaneously, the White Paper acknowledges cases of abuse such as claims of unemployment and thereby claims for credits to one's pension contribution whilst claiming unemployment benefits.

The White Paper recommends that there should be a strong compliance regime to protect the system against free riders that live off contributions paid by the majority of honest and hard working persons.

Question: The White Paper makes reference to Pay As You Go, PAYG, Two-Thirds Pension, and First Pillar Pension. What is the difference between the three?

Answer: There is no difference. Pay As You Go, PAYG and First Pillar Pension refer to the Two-Thirds Pension as we understand it within the context of the current pensions system.

The White Paper uses the terms interchangeably.

Question: What does the term Second Pillar Pension Scheme actually mean?

Answer: Today there is no Second Pillar Pension Scheme. A Second Pillar Pension Scheme is a mechanism that allows a person to invest outside of the traditional pensions system – in our case the Two-Thirds Pension – to complement the pension income that one will earn upon retirement.

The Second Pillar Pension Scheme can be of a voluntary or mandatory nature. A voluntary Second Pillar Pension Scheme implies that it is up to the individuals to decide whether they want to save for their retirement to ensure that they receive an income that gives an enhanced standard of living that compares relatively well to the one enjoyed whilst working.

A mandatory Second Pillar Pension Scheme is one that demands of an individual to invest by saving in such a fund to ensure that they enjoy an enhanced standard of living upon retirement. A mandatory or compulsory Second Pillar Pension Scheme is based on the premise of ‘social good' – in that it forces an individual to save for the future.

A Second Pillar Pension Scheme works on the basis that savings are invested and the individual receives a return on the investment made. The return on investment depends on the performance of the market.

It is pertinent to note that the longer the time period of investment the greater the return on investment should be since it is in accordance with the capital accrued.

Second Pillar Pension Schemes are not new concepts for Malta. Prior to the introduction of the Two-Thirds Pension in 1979 a considerable number of people were members of specific occupational schemes.

Question: I have read about Private Pension scheme fraud such as those that occurred in the UK. Will the same happen in Malta?

Answer: It is true that in the UK there have been cases of fraud on private pensions schemes. In most cases such fraud occurs when an employer uses the money in the pension fund to finance activities that are not related to pensions.

The Special Funds (Regulation) Act 2002 drafted by MFSA takes into account the experience of other countries. The White Paper also recommends that there must be a clear distinction between the pension fund that is created and the employer. This separation will ensure that the employer will not be able to access the pensions fund to vire the funds accumulated in it for other purposes.

Question: A private insurance firm or an employer may go bankrupt or may abuse the system. What kind of protection will I have against such events?

Answer: It is true that abuse can occur. The safeguards in this regard are based on two fundamental premises.

First, is the regulatory framework. A strong and competent regulatory framework will minimise opportunities for abuse. The White Paper recommends that MFSA becomes the regulator for the Second Pillar Pensions Scheme.

The drafting of the legislation regulating this Scheme, the Special Funds (Regulation) Act 2002, was designed taking into full account the experience learned from other jurisdictions.

Moreover, MFSA has proved to be a very competent regulator of the financial services market. There is no doubt that the same competence will be shown here.

Furthermore, a competent regulatory framework instils confidence. Consider the following analogy. Most people have no difficulty in putting their life savings in a bank. Surely life savings are as important as a pensions fund. Why then is this so? Primarily because of a strong regulatory framework which ensures that a Bank not only behaves correctly but is actually perceived to do so.

There is no reason to believe that the same trust and belief cannot be accrued to private sector firms managing Second Pillar Pension Schemes within the ambit of a tight regulatory framework.

Apart from this the White Paper recommends that the Second Pillar Pension Scheme is initially introduced voluntarily. One of the aims behind this is to help people build trust and credibility in the regulatory framework as well as the management of Second Pillar Pension Schemes.

Second, are the instruments for redress and compensation. The White Paper recommends that there should be measures and instruments in place that will provide compensation in the event of abuse or bankruptcy. The White Paper provides a number of options in this regard.

One of the options provided is the constitution of a Pensions Compensation Fund that will be governed by an independent body and that will allow for compensation to be provided as appropriate. The appropriate mechanism in this regard should be drawn out in the Second Pillar Pension Scheme study. The White Paper recommends that the Government should commission MFSA to undertake this study.

Question: The Second Pillar Pensions Scheme is dependent on market behaviour. What would happen if the assumptions do not work and the market does not behave as predicted? Will I lose my pension fund?

Answer: Protection against unpredicted behaviour of a private insurance firm will be provided through the way in which a private firm is allowed to manage that investment.

The answer therefore lies in regulation. In the absence of regulation, a private insurance firm may decide to invest in high-risk portfolios. In this regard, the danger on the return on investment could be very high.

The White Paper recommends that the MFSA should establish a regulatory framework that would determine how private insurance firms manage such an investment. The White Paper recommends that such a framework should be based on two important principles.

First, the MFSA should design a regulatory framework based on a ‘prudent-person' pensions principle. This principle would establish standards that ensure the safety of these assets as well as create the environment in which managers of the Second Pillar Pensions Scheme would obtain the best returns at an acceptable level of risk.

Second, the regulatory framework will be complemented by a number of quantitative limitations that will determine the behaviour of the managers of the Second Pillar Pensions Schemes. Such quantitative limitations will, for example, establish the percentage of the investment that can be placed in high-risk investment, the percentage of investment in a single country or firm, or the percentage of investment by the private sector firm in its subsidiaries.

Question: Will I be forced to save for my pension?

Answer: The White Paper recommends that the introduction of a new pillar – the Second Pillar Pensions Scheme – that is directed to induce people to save for their retirement.

The White Paper recommends that such savings for retirement should be mandatory – that is an individual has no choice but to invest a part of his or her income to his or her Second Pillar Pension Scheme.

Research shows that whilst deposits per capita have increased from 2.79(000s) in 1994 to 5.61(000s) in 2003 the savings ratio – that is how much one saves from his or her income – has decreased from 16.85% in 1994 to 1.30% in 2002.

The conclusions reached are that people are saving less, implying that the majority of the population would only, at best, have saved a modest amount to contribute to their standard of living during retirement.

The White Paper argues that if this trend continues, given the anticipated impacts on the pensions system, future pensioners will not be able to reach a decent standard of living on their Two-Thirds pension only.

Thus, the White Paper argues that in order to ensure social good the Government should prompt people to save to plan for their retirement even if this means that savings have to be mandatory.

The White Paper believes that for future generations to be protected such a scheme should be introduced by 2010. It recommends that the implementation of this scheme should be phased. The first phase should be the introduction of this scheme on a voluntary basis with implementation to start as from 1 st January 2006. The second phase would be to introduce the scheme on a compulsory basis as from 1 st January 2010.

The White Paper however recommends that, given the long-term assumptions upon which the calculations are based the prudent way forward would be to make this decision in 2009 – thus taking into account circumstances at the time.

Question: To what extent will I be forced to save for my pension?

Answer: The White Paper does not give direct recommendations of how much you should invest in your Second Pillar Pension Scheme. The White Paper argues that in determining the quantum of how much you should be asked to save in a compulsory Second Pillar Pension Scheme, a detailed study by professional actuaries should be undertaken to determine the impact on business and on yourself.

In this regard, the White Paper recommends that the Government should commission the Malta Financial Services Authority to undertake this study.

The White Paper however recommends that the Government and the MFSA should join forces with private sector insurance firms to introduce a new scheme, which will allow owners to have a life endowment or profit related insurance policy to convert such a policy into the Second Pillar Pension Scheme.

The White Paper recommends that a person who opts for such a scheme will be able to transfer the capital accrued under the old scheme to his or her Second Pillar Pension.

Moreover, the amount that the person will be asked to save in his or her Second Pillar Pension will be the difference between the annual premium paid on the old life endowment or profit related insurance scheme and the compulsory savings amount that is yet to be established.

Furthermore the White Paper recommends that annual savings made to the Second Pillar Pension will be non-taxable.

Question: My intention as a woman is to raise a family and embark on a full -time career. How will the reforms affect me?

Answer: The White Paper states that women are an important player in the labour market and should be encouraged to enter the work force and remain in it. The current pensions system is built around the traditional concept of the male as the breadwinner of the family. In this sense it is discriminatory against women who intend to persist with their career.

The White Paper recommends that the role of women as workers with simultaneous parental responsibilities related to child bearing and child raising should be encouraged.

In this regard, the White Paper recommends that the Government should look into measures that could be introduced in the new pensions system by providing for phased crediting as well as the payment of voluntary contributions in the event of reduced working hours with regards to parental responsibilities related to child bearing and child raising .

The White Paper does not present specific recommendations in this regard. It does however recommend that specific policy instruments on this important matter should be in place and introduced by 1 st January 2007 – the date on which the reform proposals are recommended to be introduced.

The White Paper further states that policy instruments relating to parental responsibilities should be gender neutral.

Question: I intend to have a child and work on reduced hours or part-time basis. However, the current contributions on reduced hours are too high and whilst I wish to maintain my career I do not think it is financially worth it. How will the reforms affect me?

Answer: The White Paper acknowledges that the employment of women is atypical for matters related to the family, home and upbringing of children.

The White Paper concludes that the current contribution on part-time or flexible career patterns are such that they discourage people to keep their job given that the contribution paid on the income earned is to high.

The White Paper recommends that this matter should be reviewed. It does not present specific recommendations in this regard. It does however recommend that specific policy instruments on this important matter should be in place and introduced by 1 st January 2007 – the date on which the reform proposals are recommended to be introduced.

Question: I am an engineer. In this profession, knowledge of management is becoming increasingly important. Though I have never studied management I understand that in order to improve my career I need to enhance my proficiency in this field I intend to take a year off work to read for a full time MBA. How will the reforms affect me?

Answer: The White Paper states that if Malta is serious in its intent to become a highly developed and competitive knowledge based economy than it must introduce policy measures that would inculcate a culture of lifetime learning.

In this regard the White Paper recommends that the Government should introduce a policy instrument that accounts for the crediting of one's contribution record in the event that the person takes a break from his or her work for continuous development, re-skilling or re-training.

Question: Will I have to pay more contributions as a result of the proposed reform changes?

Answer: If you are an employee the contribution you pay for your Two-Thirds Pension falls under what is known as a Class I contribution. Under the Class I contribution category you pay a contribution of 10% capped to the Maximum Pensionable income (MPI) ceiling: which stands at Lm6,750. The employer pays a similar 10% and there is a further State Grant of 10%.

If you are a self-employed or self-occupied person the contribution you pay for your Two-Thirds Pension falls under what is known as a Class II contribution. Under the Class II contribution category you pay 15% of the earned / annual income subject to an established minimum and maximum contribution. The contribution payable by the State is equivalent to 50% of this contribution.

The White Paper recommends that the contributions made under the Class I and Class II contribution categories for the Two-Thirds Pension remain unchanged . There is, however, one caveat to this. The White Paper recommends that the MPI increases annually by the rate of inflation. It further recommends that in tandem with such an increase the contributions paid will increase proportionally. The increase to the contribution you will pay here will be 10% on the rate of inflation adjustment to the ceiling of the MPI.

Further to the recommendations on the Two Thirds Pension the White Paper proposes the introduction of a Second Pillar Pensions Scheme. The Second Pillar Pensions Scheme will be a new pension that will be directed to induce you to save for your retirement.

The White Paper recommends that the Second Pillar Pensions Scheme would be phased as follows: voluntary as from 1 st January 2006 and subsequently mandatory as from 1 st January 2010.

The White Paper however recommends that the final decision for the mandatory introduction of the Second Pillar Pensions Scheme should be taken by 2009 following the undertaking of the first strategic review of the pensions system.

The White Paper does not specify the contribution rates for the Second Pillar Pensions Scheme. The White Paper proposes that the Government should get the MFSA to commission an independent firm to carry out the appropriate actuarial studies in order to identify what the Second Pillar Pensions Scheme contributions rates should be.

It is, however, pertinent to underline that the World Bank, in its March 2004 Report, recommended that the contribution to be paid on the Second Pillar Pensions Scheme should be 2% on the basic wage by both the employee and the employer.

Question: The White Paper says that part of my Social Security Contribution should go to the proposed Health Fund. Why is this and how much of my Social Security Contribution would go to the Health Fund?

Answer: The rationale behind this recommendation is based on the premise that as you grow older your dependency on the public health service tends to increase. Thus, the channelling of part of your Social Security contribution to the Health Fund is considered to be socially equitable.

Towards the end of 2003 the Government presented Guidelines to the National Commission for Welfare Reform on the reform of the pensions system. One of the Guidelines is related to the quantum of the Social Security contributions that should be channelled to the Health Fund. The Government had then recommended that 2% of your contribution and 1% of the State Grant of the Class I (employee) category should be directed to the Health Fund. In fact, the World Bank simulations carried out in its March 2004 report were based on this Guideline.

The White Paper does not specifically recommend the percentages that should be directed to the Health Fund. This is due to the fact that the formula in which the Health Fund is to be worked out is being formulated by the Ministry of Health, the Elderly and Community Care.

In the simulations carried out to test the adequacy and sustainability of the recommendation presented in the White Paper, the Pensions Working Group assumed that the component of your Social Security Contribution channelled to the Health Fund would continue to be that proposed by Government towards the end of 2003: that is 2% of your contribution and 1% of the State Grant.

The Report also recommends that people should be allowed to work beyond the statutory retirement age and earn uncapped income whilst enjoying their Two-Thirds Pension and the Second Pillar Pension (if they are entitled for this). The White Paper, however, recommends that a person who continues to work past the retirement age should continue to pay his or her full contribution entitlement. The White Paper states that this contribution will not be accumulated to the person's pension but rather should be accrued to the Health Fund. This is also based on the premise that whilst a person ages he or she tend to become increasingly dependent on the public health care system. Thus it is considered to be socially equitable that once a person continues to work past the statutory retirement they should contribute to the public heath care system.

Question: I am 63 years old. During my lifetime I have accrued considerable experience. I am healthy and I believe that I have much to contribute. Yet the current pensions system disincentivises me from continuing to work beyond the statutory retirement age.

Answer: The White Paper states that persons who exceed the retirement age should not be marginalised from the labour market. Rather, people who wish to continue to work should be encouraged to do so, subject, however, to employment being offered by an employer.

In this regard, the White Paper recommends that persons should be allowed to continue working without limiting their income and at the same time earning the full Two-Thirds Pension (and the Second Pillar Pension).

The White Paper however recommends that a person who continues to work beyond the statutory retirement age should continue to pay the full social security contribution, which will not be accredited to the person's pension. The White Paper basis this conclusion on the premise that as a person gets older there is a greater possibility that the individual will make more use of the public health system. Thus the payment of the contribution whilst working beyond the statutory retirement age would constitute a contribution to the public health system.

Question: I am 35 years old. I would not like to work till I am 65 years old. Will I be able to retire earlier?

Answer: The White Paper states that early retirement schemes should be discouraged. Whilst the White Paper does not go into great detail it does refer to allowing people to take gradual retirement between the current retirement age and the proposed statutory retirement age.

The White Paper however concludes that such retirement should be discouraged and a person should receive a lower pension if he or she opts to retire at 61 years of age instead of 65 years of age.

The decision therefore is the individual's – one should bear in mind that if he or she wishes to retire between 61 years of age and 64 years of age, this will be at the cost of a reduced pension.

Question: I am currently a pensioner. How will the reforms affect me?

Answer: The White Paper recommends that current pensioners or individuals who reach retirement age prior to the introduction of the reforms, would not be affected by the said reforms.

Question: I am currently 56 years old. How will the reforms affect me?

Answer: You will not be affected by the proposed changes relating to the

•  retirement age

•  accumulation period

•  current base line period.

If your wage is equal or greater than Lm6,750 you will benefit from the increased maximum pension income ceiling as this increases by the rate of inflation. In this regard your contribution will also increase in accordance with the rate of inflation.

Your post pension retirement income will be inflation indexed thereby ensuring that the value of your pension income will not be eroded by inflation.

Question: I am currently 52 years old. How will the reforms affect me?

Answer: If the reforms are introduced on 1 st January 2007 you will probably be 54 years old. If so you will retire at the age of 62.

The base-line for the calculation of your Two-Thirds pension will no longer be the best three consecutive years of the last ten years but will be calculated on the average of the best five years.

If your wage is equal or greater than Lm6,750 you will benefit from the increased maximum pensionable income ceiling as this increases by the rate of inflation. In this regard your contribution will also increase in accordance with the rate of inflation.

Your accumulation period will remain unchanged.

Question: I am currently 43 years old. How will the reforms affect me?

Answer: If the reforms are introduced on 1 st January 2007 you will probably be 45 years old. If so you will retire at the age of 65 years.

The base-line for the calculation of the your Two-Thirds pension will no longer be the best three consecutive years of the last ten years but will be calculated on the average of the best ten years.

If your wage is equal or greater than Lm6,750 you will benefit from the increased maximum pensionable income ceiling as this increases by the rate of inflation. In this regard your contribution will also increase in accordance with the rate of inflation.

Your accumulation period will be set at 35 years.

Question: I am currently 35 years old. How will the reforms affect me?

Answer: If the reforms are introduced on 1 st January 2007 you will probably be 37 years old. If so you will retire at the age of 65 years.

The base-line for the calculation of your Two-Thirds pension will no longer be the best three consecutive years of the last ten years but will be calculated on 40 years.

If your wage is equal or greater than Lm6,750 you will benefit from the increased maximum pensionable income ceiling as this increases by the rate of inflation. In this regard your contribution will also increase in accordance with the rate of inflation.

Your accumulation period will be set at 40 years.

If the compulsory Second Pillar Pension Scheme is introduced in 2010, you will probably be 41 years old. Whilst the actuarial studies to determine the parameters for the proposed Second Pillar Pension Scheme are yet to be carried out, you will possibly fall within the age cohort that would have to mandatory invest in a Second Pillar Pension should the Government in the first structured pensions review to be carried out in 2009 decide to introduce the Second Pillar Pensions Scheme as compulsory in 2010.

Question: I am currently 55 years old. I earn a salary of Lm3,560. How will the reforms affect me?

Answer: You will be primarily assessed under the current system other than the increase on the Maximum Pensionable Income.

You will retire at 61 years of age and it is estimated that you will receive a weekly pension of Lm57.07. At age of 75 years it is estimated that you will receive a weekly pension of Lm80.65.

If you wish you may enrol voluntary under the Second Pillar Pension Scheme. However the annuity that you will gain is still to be calculated.

Question: I am currently 52 years old. I earn a salary of Lm3,560. How will the reforms affect me?

Answer: You will retire at 62 years of age and it is estimated that you will receive a weekly pension of Lm63.00. At the age of 75 it is estimated that you will receive a weekly pension of Lm80.65.

You may if you wish enrol voluntary under the Second Pillar Pension Scheme. The annuity that you will gain however is still to be calculated.

Question: I am currently 45 years old. I earn a salary of Lm3,500. How will the reforms affect me?

Answer: You will retire at 65 and it is estimated that you will receive a weekly pension of Lm80.00.

If you wish you may enrol voluntary under the Second Pillar Pension Scheme. A decision is yet to be taken as to whether a person at the age of 45 years will be asked to compulsory enrol into a Second Pillar Pension Scheme should the Government in the first structured pensions review to be carried out in 2009 decide to introduce the Second Pillar Pensions Scheme as compulsory in 2010. The annuity that you will gain under the Second Pillar when this pension matures has not been specified yet. It will be calculated by an independent actuarial firm commissioned by MFSA.

Question: I am currently 40 years old. I earn a salary of Lm3,560. How will the reforms affect me?

Answer: You will retire at 65 and it is estimated that you will receive a weekly pension of Lm76.93.

If the Government, following the 2009 assessment, decides to introduce the mandatory Second Pillar Pensions Scheme you will probably have to compulsory save into a Second Pillar Pension. Upon retirement, this Pension will mature and you will be eligible to a lump sum upon retirement and an annual annuity payment.

The annuity that you will gain has not been specified yet and will be calculated by an independent actuarial firm commissioned by MFSA

Question: I am currently 55 years old. I earn a salary of Lm4,750. How will the reforms affect me?

Answer: You will be primarily assessed under the current system other than the increase on the Maximum Pensionable Income.

You will retire at 61 and it is estimated that you will receive a weekly pension of Lm75.98. At the age of 75 years it is estimated that you will receive a weekly pension of Lm101.37.

If you wish you may enrol voluntary under the Second Pillar Pension Scheme. The annuity that you will gain has not been specified yet.

Question: I am currently 52 years old. I earn a salary of Lm4,750. How will the reforms affect me?

Answer: You will retire at 62 and it is estimated that you will receive a weekly pension of Lm83.87. At the age of 75 it is estimated that you will receive a weekly pension of Lm107.37.

If you wish you may enrol voluntary under the Second Pillar Pension Scheme. The annuity that you will gain has not been specified yet.

Question: I am currently 45 years old. I earn a salary of Lm4,750. How will the reforms affect me?

Answer: You will retire at 65 years of age and it is estimated that you will receive a weekly pension of Lm107.36.

You may if you wish enrol voluntary under the Second Pillar Pension Scheme. A decision is yet to be taken whether a 45-year old will be asked to compulsory enrol into a Second Pillar Pension Scheme should the Government in the first structured pensions review to be carried out in 2009 decide to introduce the Second Pillar Pensions Scheme as compulsory in 2010. The annuity that you will gain under the Second Pillar when this pension matures is still to be calculated and will be carried out by an independent actuarial firm commissioned by the MFSA.

Question: I am currently 40 years old. I earn a salary of Lm4,750. How will the reforms affect me?

Answer: You will retire at 65 and it is estimated that you will receive a weekly pension of Lm94.38.

If the Government following the 2009 assessment, decides to introduce the mandatory Second Pillar Pensions Scheme you will probably have to compulsory save into a Second Pillar Pension. Upon retirement, this Pension will mature and you will be eligible to a lump sum upon retirement and an annual annuity payment.

The annuity that you will gain however is still to be calculated and will be carried out by an independent actuarial firm commissioned by MFSA.

Question: I am currently 55 years old. I earn a salary of Lm6,000. How will the reforms affect me?

Answer: You will be primarily assessed under the current system other than the increase on the Maximum Pensionable Income.

You will retire at 61 and it is estimated that you will receive a weekly pension of Lm97.15. At the age of 75 it is estimated that you will receive a weekly pension of Lm137.28.

If you wish you may enrol voluntary under the Second Pillar Pension Scheme. The annuity that you will gain is still to be calculated.

Question: I am currently 52 years old. I earn a salary of Lm6,000. How will the reforms affect me?

Answer: You will retire at 62 years of age and it is estimated that you will receive a weekly pension of Lm107.24. At the age of 75 it is estimated that you will receive a weekly pension of Lm137.27.

If you wish you may enrol voluntary under the Second Pillar Pension Scheme. The annuity that you will gain however is still to be calculated.

Question: I am currently 45 years old. I earn a salary of Lm6,000. How will the reforms affect me?

Answer: You will retire at 65 and it is estimated that you will receive a weekly pension of Lm137.28.

If you wish you may enrol voluntary under the Second Pillar Pension Scheme. A decision is yet to be taken as to whether a person at the age of 45 will be asked to compulsory enrol into a Second Pillar Pension Scheme should the Government in the first structured pensions review to be carried out in 2009 decide to introduce the Second Pillar Pensions Scheme as compulsory in 2010. The annuity that you will gain under the Second Pillar when this pension matures is still to be calculated and will be carried out by an independent actuarial firm commissioned by MFSA

Question: I am currently 40 years old. I earn a salary of Lm6,000. How will the reforms affect me?

Answer: You will retire at 65 and it is estimated that you will receive a weekly pension of Lm101.37.

If the Government following the 2009 assessment decides to introduce the mandatory Second Pillar Pensions Scheme you will probably have to compulsory save into a Second Pillar Pension. Upon retirement, this Pension will mature and you will be eligible to a lump sum upon retirement and an annual annuity payment.

The annuity that you will gain is still to be calculated and will be carried out by an independent actuarial firm commissioned by MFSA.

Question: I am currently 55 years old. I earn a salary of Lm6,750. How will the reforms affect me?

Answer: You will be primarily assessed under the current system other than the increase on the Maximum Pensionable Income.

You will retire at 61 and it is estimated that you will receive a weekly pension of Lm102.89. At the age of 75 it is estimated that you will receive a weekly pension of Lm145.38.

If you wish you may enrol voluntary under the Second Pillar Pension Scheme. The annuity that you will gain however is still to be calculated.

Question: I am currently 52 years old. I earn a salary of Lm6,750. How will the reforms affect me?

Answer: You will retire at 62 and it is estimated that you will receive a weekly pension of Lm110.84. At the age of 75 it is estimated that you will receive a weekly pension of Lm141.89.

If you wish you may enrol voluntary under the Second Pillar Pension Scheme. The annuity that you will gain is still to be calculated.

Question: I am currently 45 years old. I earn a salary of Lm6,750. How will the reforms affect me?

Answer: You will retire at 65 and it is estimated that you will receive a weekly pension of Lm133.65.

If you wish you may enrol voluntary under the Second Pillar Pension Scheme. A decision is yet to be taken as to whether a person at the age of 45 years will be asked to compulsory enrol into a Second Pillar Pension Scheme should the Government in the first structured pensions review to be carried out in 2009 decide to introduce the Second Pillar Pensions Scheme as compulsory in 2010. The annuity that you will gain under the Second Pillar when this pension matures is still to be calculated and will be carried out by an independent actuarial firm commissioned by MFSA.

Question: I am currently 40 years old. I earn a salary of Lm6,750. How will the reforms affect me?

Answer: You will retire at 65 and it is estimated that you will receive a weekly pension of Lm101.37.

If the Government following the 2009 assessment decides to introduce the mandatory Second Pillar Pensions Scheme you will probably have to compulsory save into a Second Pillar Pension. Upon retirement, this Pension will mature and you will be eligible to a lump sum upon retirement and an annual annuity payment.

The annuity that you will gain however is still to be calculated and will be carried out by an independent actuarial firm commissioned by MFSA.

Question: I am currently 55 years old. I earn a salary of Lm10,000. How will the reforms affect me?

Answer: You will be primarily assessed under the current system other than the increase on the Maximum Pensionable Income.

You will retire at 61 and it is estimated that you will receive a weekly pension of Lm102.89. At the age of 75 it is estimated that you will receive a weekly pension of Lm145.38.

You may if you wish enrol voluntary under the Second Pillar Pension Scheme. The annuity that you will gain however is still to be calculated.

Question: I am currently 52 years old. I earn a salary of Lm10,000. How will the reforms affect me?

Answer: You will retire at 62 and it is estimated that you will receive a weekly pension of Lm113.61. At the age of 75 it is estimated that you will receive a weekly pension of Lm141.89.

You may if you wish enrol voluntary under the Second Pillar Pension Scheme. The annuity that you will gain however is still to be calculated.

Question: I am currently 45 years old. I earn a salary of Lm10,000. How will the reforms affect me?

Answer: You will retire at 65 and it is estimated that you will receive a weekly pension of Lm133.65.

You may wish to enrol voluntary under the Second Pillar Pension Scheme. A decision is yet to be taken as to whether a person at the age of 45 will be asked to compulsory enrol into a Second Pillar Pension Scheme should the Government in the first structured pensions review to be carried out in 2009 decide to introduce the Second Pillar Pensions Scheme as compulsory in 2010. The annuity that you will gain under the Second Pillar when this pension matures is still to be calculated and will be carried out by an independent actuarial firm commissioned by MFSA.

Question: I am currently 40 years old. I earn a salary of Lm10,000. How will the reforms affect me?

Answer: You will retire at the age of 65 and it is estimated that you will receive a weekly pension of Lm101.37.

If the Government, following the 2009 assessment, decides to introduce the mandatory Second Pillar Pensions Scheme you will probably have to compulsory save into a Second Pillar Pension. Upon retirement, this Pension will mature and you will be eligible to a lump sum upon retirement and an annual annuity payment.

The annuity that you will gain however is still to be calculated and will be carried out by an independent actuarial firm commissioned by MFSA

Question: The reforms have been launched. I am 18 years old and I have just joined the work force. I earn a salary of Lm3,800. How will the reforms affect me?

Answer: You will retire at the age of 65 and it is estimated that you will receive a weekly pension of Lm98.18.

If the Government, following the 2009 assessment, decides to introduce the mandatory Second Pillar Pensions Scheme you will probably have to compulsory save into a Second Pillar Pension. Upon retirement, this Pension will mature and you will be eligible to a lump sum upon retirement and an annual annuity payment.

The annuity that you will gain is still to be specified and will be calculated by an independent actuarial firm commissioned by MFSA

Question: The reforms have been launched. I am 20 years old and I have just joined the work force. I earn a salary of Lm5,200. How will the reforms affect me?

Answer: You will retire at 65 and it is estimated that you will receive a weekly pension of Lm172.93.

If the Government, following the 2009 assessment, decides to introduce the mandatory Second Pillar Pensions Scheme you will probably have to compulsory save into a Second Pillar Pension. Upon retirement, this Pension will mature and you will be eligible to a lump sum upon retirement and an annual annuity payment.

The annuity that you will gain has not been specified yet. It will be calculated by an independent actuarial firm commissioned by MFSA

Question: The reforms have been launched. I am 22 years old and I have just joined the work force. I earn a salary of Lm6,500. How will the reforms affect me?

Answer: You will retire at 65 and it is estimated that you will receive a weekly pension of Lm185.43.

If the Government, following the 2009 assessment, decides to introduce the mandatory Second Pillar Pensions Scheme you will probably have to compulsory save into a Second Pillar Pension. Upon retirement, this Pension will mature and you will be eligible to a lump sum upon retirement and an annual annuity payment.

The annuity that you will gain has not been specified yet. It will be calculated by an independent actuarial firm commissioned by MFSA.

Question: The reforms have been launched. I am 24 years old and I have just joined the work force. I earn a salary of Lm6,750. How will the reforms affect me?

Answer: You will retire at 65 and it is estimated that you will receive a weekly pension of Lm186.43.

If the Government, following the 2009 assessment, decides to introduce the mandatory Second Pillar Pensions Scheme you will probably have to compulsory save into a Second Pillar Pension. Upon retirement, this Pension will mature and you will be eligible to a lump sum upon retirement and an annual annuity payment.

The annuity that you will gain has not been specified yet. It will be calculated by an independent actuarial firm commissioned by MFSA

Question: The reforms have been launched. I am 24 years old and I have just joined the work force. I earn a salary of Lm7,500. How will the reforms affect me?

Answer: You will retire at 65 and it is estimated that you will receive a weekly pension of Lm186.43.

If the Government following the 2009 assessment decides to introduce the mandatory Second Pillar Pensions Scheme you will probably have to compulsory save into a Second Pillar Pension. Upon retirement, this Pension will mature and you will be eligible to a lump sum upon retirement and an annual annuity payment.

The annuity that you will gain has not been specified yet. It will be calculated by an independent actuarial firm commissioned by MFSA

Question: The reforms have been launched. I am 24 years old and I have just joined the work force. I earn a salary of Lm10,000. How will the reforms affect me?

Answer: You will retire at 65 and it is estimated that you will receive a weekly pension of Lm186.43.

If the Government, following the 2009 assessment, decides to introduce the mandatory Second Pillar Pensions Scheme you will probably have to compulsory save into a Second Pillar Pension. Upon retirement, this Pension will mature and you will be eligible to a lump sum upon retirement and an annual annuity payment.

The annuity that you will gain has not been specified yet. It will be calculated by an independent actuarial firm commissioned by MFSA.