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Pensions across generations: scenarios for the Maltese Islands

Published online by Cambridge University Press:  09 March 2020

Melchior Vella  and
Philip von Brockdorff
Melchior Vella*
Affiliation:
Department of Economics, University of Malta, Msida, Malta
Philip von Brockdorff*
Affiliation:
Department of Economics, University of Malta, Msida, Malta
*
CONTACT Melchior Vella [email protected]
Philip von Brockdorff [email protected]
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Abstract

This paper tests whether in a PAYG system there is an inter-generational balance between the contributions made during the working-career and the pension benefit received in retirement; covering different cohorts. The analysis takes Malta as a case study. Though the dependency ratio is comparatively low, the population is rapidly ageing. The results show that there is a generational imbalance with the young cohort unlikely to be any better off than those who have already retired. This however is sensitive to the assumed discount rate and the ‘no policy’ change scenario. The results also show that future generations may be net-gainers assuming a sustained level of wage growth. If, on the other hand, wage growth slows, the younger generation may become increasingly reliant on the bequests of older generations. This would explain why pressure has increased to regularly adjust the existing PAYG system as well to introduce other forms of pension schemes.

Keywords

Inter-generational balancegenerational accountingpublic pensions
Type
Research Article
Information
Journal of International and Comparative Social Policy , Volume 35 , Issue 3 , October 2019 , pp. 280 - 298
Copyright
Copyright © 2019 Informa UK Limited, trading as Taylor & Francis Group

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