The Retirement Pension is different from the Age Pension. To differentiate between the two, this knowledge base refers to the retirement pension under the social security contribution scheme as the Social Security Pension. While the retirement pension falls under the social security contribution scheme, the age pension is a non-contributory benefit. It is important to also note that the Social Security Pension is also different from a Service Pension, Second Pension, a Mandatory Second Pension (or Mandatory Second Pillar Pension) and a Third pension (or Third Pillar Pension).
Age Pension – a means-tested non-contributory benefit pension for those who reach 60 years of age. Eligibility:
- is employed part-time
- in receipt of a social security benefit such as Social Assistance or Unemployment Assistance
- her/his pension rate is less than Age Pension Rate for a household
- does not have enough paid or credited social security contributions to be eligible for a contributory pension.
Malta’s social security system, however, is designed to provide its citizens with a safety net. Thus, a person who has failed to pay the minimum level of social security criteria may be entitled to an Age Pension.
Receipt of an Age Pension is not automatic for a person who failed to qualify for a Social Security Pension. For a person to qualify for an Age Pension he or she has to pass a capital and income means test.
The capital and income means test is a mechanism that ensures that only persons who do not meet a defined level of capital and income resources qualify for the receipt of an Age Pension.
Service Pension – also know as the Treasury Pension
Prior to the introduction of the social security contributions scheme in 1979, where income related contributions started to be paid, employees were in receipt of occupational pensions paid by their employer. For example, employees who joined the government prior to 1979 were in receipt of what is known as ‘The Treasury Pension’.
The social security reforms of 1979 no longer allowed for the payment of occupational pensions by employers to their employees. Most private employers liquidated such occupational schemes. Others, such as the Treasury Pension continues to be award for persons employed in 1979 or earlier subject, however, to certain conditions.
The flat rate pension is awarded to pensioners who are in receipt of a service pension.
- All government employees who started service with government before 15th January 1979 and whose service with the government was continuous.
- Police, AFM personnel, Correctional Facilities officials and members of the Civil Protection;
- Members of Parliament,
- Members of the Judiciary and the Attorney General.
|2008||Lm 200.06 - Euro 466.01|
The total amount ignored for assessment purposes for pensioners in receipt of a service pension stands at €2,666.
A person with an original amount of service pension of €13785.67 whose start date of his social security pension was on 16/07/2011, has his pension rate re-assessed yearly. Re-assessments of pension are carried out with effect from the following year, in this case with effect from 2012 and would include service pension abatements, decreasing original amount of service pension as such.
• Original Amount €13,785.69
• Less amount above €1066.02 (from start year of abatement up to 2012)(466.01+200+200+200)
• Service pension that was being calculated for year 2012 €12,719.68 (13785.69-1066.02)
This is a pension that governments in a number of countries introduced to encourage persons to save to top-up their income in retirement over and above the pension income they will receive from their State pension.
In a second pension scheme the contribution that you would pay would go directly to a pension account that belongs to you. A second pension scheme can be introduced in a mandatory or voluntary manner.
Malta does not have such a pension scheme in place today.
The government to encourage people to save for retirement incentives you, normally through tax credits, to invest in a personal private pension scheme. Given that you have benefited from an incentive to invest in a personal private pension scheme you are subject to certain conditions on how you can draw down your savings such a pension scheme.
Normally such a personal private pension scheme is long term and ‘locks’ your savings up to a certain age, some start as early as 50 years.
Thereafter you are allowed to opt to withdraw a small proportion of your saving as a lump sum with the remaining large part of the savings to be received as a monthly annuity or a programmed annual / monthly income or any other form of income withdrawal as established by the regulatory framework.
In 2015, Malta introduced a legislative framework for the provision of a Third Pension. In fact, since November 2015 financial service providers have launched a number of Third pension schemes.