The reform of the pension system is, reportedly, the next big project that will be undertaken by the government, now that it has fully restored CoLA, for the benefit of the highest-paid public employees and has prepared a partial reform of the taxation system, focused only on direct taxation. Nothing has been agreed yet and the so-called social partners will have to engage in dialogue, but the government is determined to have the necessary legislation approved before the parliamentary elections of May next year.

It is a very tight schedule, considering the legislature will dissolve more than a month before the elections and will have long list of bills to approve until then. This rushed approach has also been followed in the reform of the tax system, the government demanding that the legislature approves the relevant bills within a few weeks, before it breaks for Christmas, so that the new system is in force in 2026. Expecting the legislature to approve such important bills in such a short period of time is totally unreasonable and nobody would blame the parties if they were not approved in December and the reform had to wait another year for implementation.

Now, the government seems intent on doing the same thing with the pension system reform, pressuring the parties for its approval without giving them a chance to thoroughly examine the proposed changes. This is a very important reform that cannot be rushed through without proper debate. In fact, the government does not seem to have made any firm decisions as the proposed changes will be discussed with the so-called social partners for consensus to be achieved.

Consensus is not guaranteed, however, as differences are already surfacing over government plans to make pension funds a legal obligation of all businesses. There would be issues about the level of contributions, the administration of the funds and so forth. What everyone seems to agree on is that the state pension, drawn from the social insurance fund, is not adequate for a pensioner to maintain the standard of living they had when employed. According to the experts, the pensioner must be paid the equivalent of 70 per cent of job earnings to maintain their standard of living.

It goes without saying that only public employees get pensions that correspond to their earnings. For private sector workers, there is a €2,000 per month limit regardless of how much money they have contributed to the social insurance fund. They may have contributed three times as much as a public employee to the fund in their working life and receive half the state pension paid to the public employee. For decades, public employees did not contribute anything towards their pension but were still paid the highest pensions.

These institutional inequalities must also be addressed by the reform. An end must be put to many pension privileges enjoyed by the public employees if there is to be real reform. Perhaps the reason the government wants to rush the pension reform through is so that it does not have to deal two-tier pension system heavily favouring public employees.