At the end of 2007 accumulated pension liabilities amounted to €14.3 billion or 264.2 per cent of GDP.
The Committee for Monetary, Financial and Balance of Payments Statistics (CMFB) in June 2006 established by mandate a joint Eurostat/ECB Task Force to work on the compilation and statistical measurement of the assets and liabilities of pension schemes of the EU Member States. Throughout 2008, The National Statistics Office cooperated with Freiburg University, as subcontractors to the joint Task Force, by making available the data required for computing the accrued-to-date pension liabilities for Malta. The pilot exercise covered calendar years 2006 and 2007.
Accrued-to-date pension liabilities represent the current value of pensions to be paid in the future, on the basis of accrued pension rights. This interpretation does not consider the future contributions of current workers, or the accrual of new pension rights to such workers. The joint Eurostat/ECB Task Force considers the accrued-to-date concept as being the most appropriate for eventual inclusion in the (non-core) national accounts of a country.
The model developed by Freiburg University evaluates the accrued-to-date pension liabilities of EU Member States using common benchmarks, thus enabling cross-sectional analysis. The model assumes a universal 1.5 per cent real growth in the Gross Domestic Product and in wages. The inflation rate and discount rate are assumed to be 2.0 per cent and 3.0 per cent respectively.
The data supplied to Freiburg University consisted of all pension payments (Old Age, Disability, Survivors’) made in 2005, 2006 and 2007, split by gender and by single years. Data on Treasury pensions was provided in an aggregated format. Future income projections were based upon 2005, 2006 and 2007 earned income, and these were also disaggregated by gender and by single years. Apart from arriving at the estimated pension liabilities, the sub-contractors were able to estimate the effects of the local Pension Reform of 2006. A preliminary report by Freiburg University estimates that by raising the statutory pension age from 61 to 65 (in the period 2014 to 2023), Maltese pension liabilities accrued at the end of 2006 will be reduced by approximately 7.0 per cent of the Gross Domestic Product. It is estimated that the whole Pension Reform has reduced pension liabilities by about €1.6 billion.
There are two approaches to estimating social security pension liabilities. The liabilities through the accumulated benefit obligation (ABO) method, amounted to €10.9 billion at end of 2007, or 201.6 per cent of GDP. Concurrently, the Treasury pension liabilities for the same year amounted to €2.1 billion, or 38.6 per cent of GDP.
The projected benefit obligation (PBO) method inflates the pension liabilities as future wage increases are taken into account when applying wage indexation to pension payment increases. These liabilities as at end of 2007 are estimated at €12.1 billion, or 224.2 per cent of GDP, while Treasury pensions are estimated at €2.2 billion, or 40.1 per cent of GDP.
In due course, the joint Eurostat/ECB Task Force will be publishing the accrued-to-date pension liabilities for all the Member States participating in this pilot project.