Workplace Pensions in Malta: What You Need to Know

JOSEF CAMILLERI – HEAD OF PRODUCTS AND DISTRIBUTION – HSBC LIFE ASSURANCE (MALTA) LTD.

In today’s competitive job market, more employers are helping their employees save for retirement by offering workplace pension schemes. Following the 2025 Government Budget, this may soon become a requirement for many. This article explains what these pensions are, who contributes, and how recent changes in Malta’s 2025 budget effect workplace employee pensions.

What is a Workplace Employee Pension Plan?

A workplace employee pension plan is a retirement savings plan set up by an employer, which may accept contributions from both the employer and the employee. These pension plans are designed to supplement the state pension, providing employees with greater financial security in retirement.

Updates from the Malta 2025 Budget

Malta’s 2025 budget introduced new changes aimed at expanding access to workplace pensions:

• Opportunities for All Employees: Employers must now offer employees the option to join an occupational pension plan. While employers are not obligated to contribute financially, they must provide employees with the choice to participate.
• Government Contributions for Public Sector Employees: For government employees, the government will match employee contributions up to €100 per month. This initiative encourages and leads the way for other employers to support their employees’ retirement savings.

Who Contributes to Workplace Pensions?

Employers have the option to contribute to workplace pensions, but this is not mandatory under the recent announcement in the 2025 Government Budget. Employees, however, have the right to participate. When employers do contribute, employees’ savings can grow faster, especially when employees make contributions as well.

Tax Benefits for Employees

Similar to Personal Retirement Schemes, employees who contribute to a workplace employee pension plan can enjoy tax advantages. They may qualify for a tax credit of up to €750 annually, which is equivalent to 25% of a maximum contribution of €3,000.

Here’s how the tax credit may work, using examples:

• For a contribution of €100 per month (€1,200 annually), an employee may receive a €300 tax credit.
• For a contribution of €150 per month (€1,800 annually), an employee may receive a €450 tax credit.
• For a contribution of €250 per month (€3,000 annually), an employee may receive the maximum €750 tax credit.

Employees who have both a Personal Retirement Scheme and a workplace employee pension plan have the opportunity to benefit from the tax credits offered for both plans.

Tax Benefits for Employers

Employers who support workplace pensions can also benefit from tax incentives. They may qualify for up to €750 in tax credits per employee and an additional tax deduction of up to €2,000.

How Workplace Pensions Are Invested

Workplace employee pensions are often invested in funds, which may be selected by the employee or placed in default funds designed to help savings grow over time. The level of investment risk chosen often depends on individual circumstances, including how close one is to retirement. Some may prefer higher-risk investments with greater growth potential, while others may opt for safer, lower-risk assets. Investment values can fluctuate, so the total savings available at retirement may vary.

What if an Employee Changes Jobs?

If an employee changes jobs, they can take their pension savings with them. The previous employer’s contributions will stop, but the employee has several options:

• Transfer the pension savings to the new employer’s scheme (if available).
• Convert the savings into a personal retirement plan.
• Stop contributing and retain the funds in a dormant plan, though this may reduce the final amount available at retirement.

When Can an Employee Withdraw?

In Malta, employees can begin accessing their workplace pension savings no earlier than age 61 and no later than age 70. However, exceptions may apply in cases where the scheme allows for payments due to the permanent disability or death of the beneficiary.

Depending on the applicable plan’s rules, employees shall be paid in the following forms:

• Receive regular income payments (programmed withdrawals) or Life Annuity (mandatory)
• Take a tax-exempt lump sum of up to 30% of the plan’s value upon retirement (optional)
• Additional cash lump sum (optional).

Workplace employee pension plans provide a valuable way for employees to save for retirement while benefiting from tax advantages. Recent changes in Malta’s 2025 budget have made these schemes more accessible, offering both employers and employees new opportunities to plan for the future.