The impact of EU membership on pensions in Malta

Abstract

A pension is a part of a social system that is based on a “Pay As You Go Pension System” (PAYG) basis, which provides pensions for old-aged pensioners, survivor’s benefits and invalidity pensions. The main type of retirement regime is the “two-thirds pension” scheme. The entire population is covered under contributory or non-contributory pension schemes. The contributory scheme consists of two methods, class one is paid by employees and employers, where it represents 10 percent of the basic weekly wage, and the second class is that where the self-employed worker pays a contribution based on their total net income, with a maximum rate of 15%. Contributions are obligatory and have to be paid by all those concerned, between the age 16 and that of 65. Persons over 65 years are not to pay contributions even if they remain in employment. The non-contributory scheme provides pension and allowances to Maltese citizens aged more than 60 who satisfy eligibility conditions of residency and financial means test. The means test is calculated based on the capital assets and income of the household members. Malta, is now part of the EU, and thus will be covered by the social security coordination cover of old-age and survivors pensions. In principle, they apply to state pension schemes and not to occupational or private schemes. By this, the European council adopted Directive 98/49/EC on safeguarding supplementary pension rights of employed and self-employed persons moving within the European Union.