A statement issued by the government regarding pensions this week again shone a spotlight on Malta’s birth rate problems.
The statement read that the government tabled the 2025 Report of the Pensions Strategy Group in Parliament, and that the report forms part of the statutory five-year review of pensions in Malta, which focuses on adequacy, sustainability, and social solidarity.
The statement said that the review is being conducted at a time of rapid demographic change: “fertility has declined to 1.06 while life expectancy continues to rise, resulting in a population that is ageing more rapidly. By 2070, people aged 65 and over are expected to account for 33.6% of the population, while the Old Age Dependency Ratio – in other words, the proportion of pensioners to workers – is expected to double over the next 45 years. This is taking place while the country has witnessed forward-looking changes in the labour market, including record employment rates, increased female participation, and a rise in foreign workers.”
The statement points out that recent reforms improved the adequacy of pensions, and that long-term projections show that sustainability also improved. It added that the point at which expenditure begins to exceed revenue-previously estimated to occur in 2051 – now having been pushed back by three years to 2054. The government said that while there is no increase in the retirement age or in social contributions contemplated, the group emphasised a number of structural questions that need analysis, including the role of migration, the composition of wages, quality of jobs, private pensions and more.
A number of points about this must be made. Firstly, the low fertility and the ageing Maltese population is a cause for concern. The government’s move in the budget to reduce the tax for parents with children is seen as a way to try and help those wanting to have children to do so. But undoubtedly more incentives would be needed. The ageing Maltese population is going to be a major challenge that the country will face in the future.
There is also no doubt that the way the economy grew over the years, requiring a such a quick rise in population numbers, has helped pensions. But this having occurred without a proper plan has resulted in an impact on the country’s infrastructure and housing market.
Malta has limited space as a country, and continuing to rely on increasing worker numbers for the economy will not be sustainable long-term. A change to requiring lower workforce numbers is needed, but that will also require changes to the economy to ensure higher-paying jobs. All this, too, could affect pensions in some way. This is why continued studies and reviews of the pensions in Malta to ensure their long-term sustainability is key to planning ahead.