The retirement age is set at 65 years, with the maximum state pension in Malta at approximately €229.20 ($259) per week. This figure is fixed irrespective of how long an individual has worked or how much they have earned during their lifetime.
Today, with an aging population and people living longer, this creates challenges for states seeking to cope with maintaining pension funds for the current workforce. In fact, a few years back, Malta's government launched a scheme to try and incentivise individuals to continue to work post-retirement age by increasing the pension. However, the weekly increase was so minor, it was questionable whether it served its purpose.
In addition, in recent years there has been a drive by Maltese legislators to incentivise employers to provide pension plans to their employees. Whereas private workplace pension plans are increasing, such schemes are not considered to be the norm.
On September 12 2017, the voluntary occupational pension scheme rules were published in Subsidiary Legislation 123.175 (VOPS), which was applied retrospectively and came into force on January 1 2017. VOPS seeks to incentivise employers to make contributions to a qualifying pension plan on behalf of employees, by providing a tax deduction to the employer and tax credits to both the employer and employee.
In addition to the tax deduction and available tax credits, VOPS note that any contributions paid by the employer, on behalf of the employee, does not constitute a taxable fringe benefit in the hands of the employee. This further adds a fiscal benefit for employees, and a way for employers to create attractive remuneration packages for their employees.
Whereas VOPS was published in 2017, almost two years later its application is relatively new. In fact, last October, and presumably with a view to promoting the application of VOPS, in the financial budget speech of 2019, the Minister for Finance announced that VOPS will be amended to provide greater benefit to both employers and employees utilising such schemes.
Currently, no amendments have been made to VOPS and neither were the amendments referred to in Bill 65 in 2018 on the Budget Measures Implementation Act. It is expected that these amendments will be published within the coming months.
As the retirement age increases, available state pension funds are decreasing. Whereas private workplace pensions are not mandatory, the publication of VOPS is a good starting point for employers to introduce such schemes into their workplace, with a view to supplementing state pensions in the years to come.