Guest blog post by FHRD Member, APS Bank plc.

One debate which is gathering steam is the pensions’ landscape in Malta. The demographic challenges brought about by the baby boomers’ era and the way social norms evolved over subsequent years, meant that governments in developed countries could no longer depend on people in employment financing the ever-increasing number of pensioners.  Whereas many other countries have long implemented effective pension reforms to tackle these challenges, it was only in 2014 that the legislation was enacted in Malta to kickstart this process.

Fast forward to today, and while developments have been made, we are still very early in the process and there is more to be done before we may bridge such a gap. Pension legislation brought about important reforms, in particular the 3 pillars, which are:

  1. State Pension
  2. Occupational Pensions and
  3. Personal Pensions.

These now work together and benefits of one does not affect the benefits of the other two.

APS Bank plc is at the forefront of this relatively new phenomenon and the Bank’s 2nd and 3rd pillar qualifying pensions enable organizations and Individuals who invest in these products to fully enjoy the available tax benefits.  Pensions are a long-term investment and when choosing a pension provider, reliability and reputation of the provider is key and APS Bank plc, as the oldest Bank in Malta, has proved this since its inception in 1910.

The APS Occupational Pension Scheme falls under the 2nd pillar of the legislation.  Occupational Pension Schemes are a cost-effective employee benefit which provide organizations with the opportunity to attract, retain and reward key employees in a tax efficient manner.  By contributing to an employee’s pension pot, employers’ benefit from a 25% tax credit on contributions of up to €3,000 per employee and are tax-deductible up to €2,000 per employee per annum.  If in any tax year the tax credit cannot be claimed (because there is no or less tax due by the company) then the excess can be carried forward to be utilized against tax in the future.   Depending on the amount contributed, these two benefits combined may potentially reduce the cost to the employer of up to 60% i.e. for every €100 contributed the net expense is only €40.  Further intangible cost savings associated to employee turnover such recruitment and retraining further enhance the viability of this product.

Furthermore, employees also have the opportunity to contribute to 2nd pillar pensions and they, as contributors, will benefit from a 25% tax credit up to a maximum contribution of €3,000.  Contributions made by employees through their Employer’s scheme will not affect the tax benefits they are entitled to if they also have a personal scheme.  They do not have to open a bank account with APS Bank, as all contributions are done through payroll.

The APS Personal Pension Plan falls under the 3rd Pillar and are an attractive and effective way for individuals to save money for their retirement by setting aside a small portion of one’s income on a regular basis enabling such savings to eventually grow into a sizeable pot of money over the long-term.  Contributions for the first €3,000 made during a particular year attract a 25% tax credit.

One can start drawing benefits from their pension pot at age 61 and can withdraw up to 30% in the form of a tax-free lump sum.  The rest can be withdrawn via programmed withdrawals or by purchasing a guaranteed income for life through an annuity. The amount of the eventual pay-out will depend on the amount invested, the term and the performance of the investments. Those starting at a young age tend to have larger pots upon retirement and one reason is because returns are free of tax and are compounded, resulting in a snowball growth effect.

 APS Bank is one of the oldest banks on the Maltese Islands and is a leading provider of financial services, offering personal, business and investments solutions. To find out more about Benefits Scheme, do not hesitate to contact us at [email protected]

The Author –

Darran Agius – Employee Benefits Schemes Manager

Email:  [email protected]

Direct Telephone Line: 25603353

Approved and Issued by APS Bank plc, APS Centre, Tower Street, B’Kara BKR4012. APS Bank plc is regulated by the Malta Financial Services Authority as a Credit Institution under the Banking Act 1994 and to carry out Investment Services activities under the Investment Services Act 1994. The APS Personal Pension Plan is licensed and regulated as a personal retirement scheme by the Malta Financial Services Authority in terms of the Retirement Pensions Act (Chapter 514 of the Laws of Malta). This advertorial has been prepared and approved by Trireme Pension Services (Malta) Limited (as the retirement scheme administrator) and APS Bank plc (as distributor of the scheme). Terms and Conditions apply and are available upon request.”