Pensions

 

“When the financial and economic crises of late 2008 developed into a sovereign debt crisis, Member States felt not only the short-term challenges to their pension arrangements from the economic situation. They also started to perceive the impact of the beginnings of the medium-to-longer-term challenges of population ageing.

Thus Member States were forced to take a closer look at their pension schemes’ capacity to handle risk, weather market volatility and absorb economic shocks. …

A raft of pension reforms has followed over the last four years. Changes introduced have brought major improvements in the medium-to-long-term sustainability of pension provision. While lowering replacement rates, many reforms have at the same time widened coverage and strengthened poverty protection.

23 countries are raising the pensionable age and six have decided to link it to life expectancy.

In most Member States, access to early retirement is being restricted or phased out and important steps are being taken to make a longer working life possible.”

(European Commissioner responsible for Employment, Social Affairs and Inclusion- March 2014)


Pensions in Malta

Malta, on similar lines to other EU Member States, is in the process of reviewing its pension framework. The Maltese pension model is substantially Pillar I based, although the Government has proposed the introduction of a tax incentive tied to special individual savings accounts or insurance policies, a Pillar 3 incentive. During November 2014, Government launched a Pillar III pensions scheme whereby qualifying accounts or policies enjoy a tax credit of 15% of the value of the contribution made in one year or €150 whichever is the lower.

The Pensions Strategy Group (PWG) continues to study the sustainability of pensions in Malta. The possibility of a mandatory second pillar pension has been debated for several years, although tangible proposals for its implementation are not on the current administration’s immediate agenda. It is still to be seen whether the current Pillar 1 regime, complemented with Pillar 3 incentives and other initiatives, including an increasing retirement age, will be sufficient to resolve the pension sustainability issue faced by the Maltese economy. Pillar 2 comes at a cost to employers and, has other implications, including regulatory and systems connotations.

It is important for employers to be aware of the developments taking place in this area. Planning ahead will enable employers to participate in the debate that is presently ongoing, to meet obligations in a timely manner and to ensure that advantages are optimised.