The Third Pillar Pension

The Third Pillar Pension

One of the main pillars of Malta’s social security system is the Social Security Contribution Scheme, which provides us with a pension at the end of our working careers. The Third Pillar Pension scheme launched by Government back in November 2014, was aimed to encourage earners to start saving for their retirement and maintain their future quality of life.

The incentive was aimed at encouraging Maltese residents to start further saving for their pension by investing in private products offered by local banks, life insurance companies and other financial institutions.

One notes that life expectancy, thanks to advances in medicine and healthier lifestyles, is increasing. Its downside however is, that most of us will work for longer years. The retirement age has been pushed backwards in most developed countries over the past decade, and it could rise even further as we all live longer. Planning and putting a small amount aside at this stage will make your retirement easier to plan.

The size of your pension pot when you retire will depend on:

  • how much you pay into your pension pot

  • how long you save for

  • how well your investments have performed

  • what charges have been taken out of your pot by your pension provider

This is why it may be the right time to consider seeking professional advice on investing in a private pension, or as is also known, a third pillar pension scheme. You will need to talk with your bank, investment advisor or pension provider to learn more about the opportunities available for you, depending on what income you’re able to put aside, in order to put your mind at rest for the future.

To incentivize Maltese residents into going for a private pension, Government had launched an incentive whereby investing in a private pension will allow you to save tax. In fact, when opting for a Personal Retirement Scheme, Maltese resident tax payers are able to obtain a tax credit against income tax chargeable in Malta. This is applicable on any contributions made by a person to any personal retirement scheme or premiums paid in respect of a qualifying policy of insurance. The second scheme, the Individual Savings Account (ISA), is also offered as part of the Third Pillar Pension Scheme. The ISA provides families the option to open a tax free savings account. Individuals can withdraw funds from such accounts any time, similar to a normal savings account.

As indicated, advice should be sought form licensed investment advisers. A list of licensed financial services institutions is available on the MFSA website.