Many expats choose Malta as their perfect destination to retire – and it’s easy to see why. With warm, sunny weather, low taxes, cheap properties, some of the best healthcare in the world, and an English-speaking population, it’s no wonder so many people choose to spend their twilight years here. But before booking your flight, you should look for information about Malta pensions, and how they can be affected by moving.
The same goes for expats who are attracted to this Mediterranean country for reasons other than retirement. Nobody likes to think about getting old, but if you’re working or studying in the Maltese islands, you should keep your retirement fund in the back of your mind.
The good news for Brits is that the Maltese public superannuation system is very similar to that of the UK. The state has its own contribution-based public system. The contribution rates are low – and unfortunately, so are the payouts. There is also means-tested support for the elderly who are suffering from financial problems. Beyond this state-subsidised programme, workers will need to save privately for retirement.
State Pensions Malta
This is known as “Two Thirds Pension”, as the benefit should be two-thirds of your pensionable earnings.
This benefit depends on your National Insurance Contributions, known as NICs. These are divided into two categories: Class 1 covers all workers on a salary, while Class 2 contributions are specifically designated for the self-employed.
In general, the rule of thumb is that employees, employers, and the government pay 10% each. Class 1 NICs have a minimum of about €850 per year, although this can vary, and a maximum cap of around €2,100 annually – or, if you consider the fact that each party pays 10%, a total of approximately €6,300.
For the self-employed, Class 2 NICs must be 15% of insurable earnings. The minimum is around €1,300, with the maximum cap set at approximately €3,100.
Applying For State Pensions Malta
Before applying for benefits, indiviuals must have reached Malta pensions age. As in the UK and many other countries, that age is rising all the time. Right now it’s 62, but if you were born in 1962 or later, check, as it is slowly being increased to 65. To qualify for benefits, you must have worked for at least 10 years before retiring, and you must have contributed for a minimum of approximately 14 years.
At the time of writing, the maximum state pension is approximately €226.04, but be sure to check for up-to-date information before applying.
The Maltese private superannuation system is regulated by the 2002 Special Funds (Regulation) Act. Under this act, it is possible to invest your savings in a fund with tax-free capital growth.
British expats who want to transfer their British retirement savings to Malta are perfectly able to do so, using QROPS regulations. However, it’s important to keep in mind that contributions will not currently attract Maltese tax relief. Workers in Malta are only able to save their net income, after all taxes have been paid out. At the moment, there are some proposals in place relating to the introduction of schemes based around tax-deductible contributions – but none have come to fruition yet.
Even those who have not been living or working in Malta long enough to meet the requirements for Malta pensions might be able to qualify for other benefits. The means-tested non-contributory age pension is one of these, designed specifically for low-income individuals whose capital is less than €14,000. If you are married, then your joint capital must be less than €23,300.
The minimum age for applying for this benefit is 60. The amount that you will receive will vary depending on your marital status, although in general the weekly amount will be somewhere between €81.90 and €126.74.
Look out for other benefits paid out by the government that you might qualify for, including the Senior Citizens Grant and a cost of living benefit.
As a member of the EU, Malta is subject to regulation 1408/71. Additionally, it has made social security agreements with Australia and Canada. These arrangements cover both the self-employed and employees.
Look into the relevant social security agreements for your country. In some cases, they “totalise” your Maltese periods of contribution with those from your home country. This means that the two periods can be added together, helping you meet the minimum number of years of contributions that you must have in order to claim benefits.
In addition, it’s worth looking into superannuation schemes. These tax-efficient products are usually subject to heavy regulations. Check how your international superannuation schemes are affected by Maltese law. In particular, you need to look up how your foreign pension arrangements will be taxed while you are resident here, and how your pension payouts will be taxed.
Take care – you may be subject to double taxation, in the event that your pension contributions are not deductible in your home country. Note that many countries have tax treaties, specifically to avoid this situation – but there are exceptions.
If you don’t plan to stay in Malta, then you might want to retain the arrangements you’ve made about pensions in your home country. However, expats who aren’t sure of their future security are advised to seek professional advice – when it comes to pensions Malta, you can never be too careful.