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Malta

12 March 2018

Malta: voluntary occupational pension scheme in force – other improvements announced

A long awaited voluntary occupational pension scheme was launched in the autumn of 2017. So far, there is no evidence of the functioning of the scheme that is mainly based on tax incentives. The government in office, which won the election in June 2017, promised to repair the stagnating pensions.

By means of Legal Notice 228, published in September 2017 and entitled ‘Voluntary Occupational Pension Scheme Rules’, the Government launched the long awaited tax incentives for occupational pension plans. The idea was to stimulate both the employer and the workers to set up an occupational pension. The incentives available under the legal notice are: a maximum annual deduction for employer contributions from the employer’s taxable income of €2,000 per employee, per annum; a maximum tax credit on the employer’s tax bill of €150 per employee, per annum in connection with employer contributions; and a maximum tax credit on the employee’s personal tax bill of up to 15% of the aggregate amount of the qualifying contributions made during the year up to a maximum of €150, per annum, in connection with employee contributions.

The rules have come retroactive in force (from 1 January 2017) and apply to certain types of employers as defined, including self-occupied persons as well as associations representing employers and self-occupied person. The tax credits or deductions become available as soon as an employer or an employee decides to contribute in a so called ‘qualifying scheme’. A ‘qualifying scheme’ is either a retirement scheme licensed under the Retirement Pensions Act or a long-term contract of insurance that fulfils the requirements of these rules and which is approved by the Tax Commissioner. An occupational retirement scheme is defined as 'a retirement scheme established on a voluntary basis for, or by, an employer or a number of employers, or an association of employers (also including self-occupied persons), jointly or separately for the benefit of qualifying employees’. A personal retirement scheme, on the other hand, is defined as a retirement scheme which does not fall within the definition of an occupation retirement scheme and to which contributions are made for the benefit of the individual. At the moment of writing (early 2018), it is unclear whether the voluntary system functions.

The Labour government won the elections in June 2017 with a campaign that highlighted the party's fight on poverty and promised increase in pensions, social benefits and childcare. At the end of 2017, the state pensions were increased for the third successive year, with every pensioner (some 90,000 in total) benefitting from a weekly pension increase of 2 euro - a budget measure that has cost the public finances 9 million euro. In the meantime, governmental representatives have announced further plans to improve the situation of pensioners, with the aim to spread the benefits of a strong economy among all pensioners, rather than just to those on a contributory pension. The prime minister stated in February 2018 that the government would continue to increase pensions repairing 25 years of stagnation.

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