An analysis of retirement plans : financial institutions perspective

Abstract

This research has been divided into two. The first part sees to address the main important factors which make the current pension system unsustainable. The pension system is dependent on the contributions. Contributions are paid by the working population to the government then the government sees to distribute the contributions as pension benefits to the retired individuals. The system started to become unsustainable because of the problem of an ageing population. The growing number of elderly and the increasing perception of the individuals' economic obsolescence take us to the second part of the dissertation. The second part sees to focus on the third pillar of the pension system. The third pillar is where individuals save for their own retirement. Saving for retirement implies saving for the long term. Generally individuals do not have financial knowledge to make such decisions. Not having the financial knowledge contribute to being scared and not wanting to take such important decisions and demanding protection. From the financial institutions perspective, the research aimed to determine their perspective on the current pension system in Malta. In light to this problem; what are financial institutions offering as retirement products, are people demanding more retirement products, and are individuals being offered some kind of protection for their old age savings. Results show the financial institutions are aware of the unsustainable pensions system. However, there is low trust and awareness of retirement products and as a result, financial institutions have an important role in equipping staff with the financial knowledge to be able to promote these retirement products. The government also has an important role in pushing these products and organising information meetings. As proposed in the budget (2014) the Government is acting by giving tax incentives to support people to save for their own retirement so individuals can be able to maintain their standard of living after the working life has finished. The study has managed to produce numerous results and valuable data from the primary and secondary research conducted. Ultimately, the research concludes by suggesting how both awareness and incentives could be increased amongst the population.