Entitlement to contributory benefits, apart from any other statutory conditions, depends upon a contribution test.
a) A Two-thirds Pension - an insured person needs to have at least 1 contribution paid after 21st January 1979.
b) A Retirement Pension - an insured person needs to have paid 1 contribution before the 16th January 1979.
The test is an arithmetical calculation of the yearly average of contributions paid by or credited to the insured during a certain period (as specified by the Social Security Act Cap. 318). Normally this period can vary from 35 years in the case of a Two-thirds Pension up to 42 years in the case of a Retirement Pension. For further details on the method of calculation see 6 and 7 below.
2. Once a person reaches retirement age, does s/he automatically become eligible to receiving a retirement pension?
The eligibility is automatic and therefore a person who reaches retirement age does not need to fill in an application. However, such persons will receive a notification requesting any missing data.
3. Once a person retains or restarts employment after the award of Retirement Pension, is s/he entitled to statutory bonuses from the Department of Social Security (DSS)?
Persons who opt to continue or start full-time employment are not entitled neither to June/December bonuses, nor to a Special Bonus (paid to pensioners instead of March/September bonuses). Bonuses must be paid by the employer/s.
Persons engaged in part-time employment/s of 8 hours or more than 8 hours per week are entitled to the above bonuses on a pro-rata basis, that is, according to the number of hours worked. The employer is obliged to pay pro-rata bonuses in accordance with Article 23 of the Industrial Relations Act (Chapter 452)
Persons engaged in part-time employment of less than 8 hours per week are paid all statutory bonuses from the Department of Social Security.
Persons engaged in self-occupation (either on full-time or part-time basis) are entitled to all bonuses from the Department of Social Security.
The Cost of Living Bonus is paid to all pensioners.
4. What is the rate of retirement pension?
The rate of Retirement Pension depends on the average of contributions paid and on the pensionable income earned from gainful occupation in the last eleven years prior to retirement (see Question no. 6 below for more details).
5. What is the pensionable income?
The Pensionable Income is the average result of the income earned by a prospective pensioner in the last eleven years prior to retirement.
The assessment of such pensionable income is subject to whether the claimant is employed, self-employed or self-occupied. In the case of an employed person, the pensionable income is the result of the average highest income earned in three consecutive calendar years in the last eleven full calendar years prior to retirement. In the case of self-occupied and/or self-employed persons, the pensionable income is the result of the average income earned during the best ten consecutive calendar years in the last eleven years prior to retirement.
6. What is the difference between a Two-Thirds Pension and a Retirement Pension?
The Two-Thirds Pension is an earnings related pension applicable to all persons who have been insured after the 16th January 1979. The person must satisfy the contribution conditions laid down in the Social Security Act (see 7 for more details).
The rate of a Two-thirds pension depends mainly on the average of contributions paid or credited (see 7 below for more details) and the insured person’s pensionable income (see 5 above). There is a maximum and minimum rate of Two-thirds Pension, which is dependent upon the insured person’s yearly contribution average. In the case of the flat rate retirement pensions, these are paid to persons who were registered under the old National Insurance Act prior to 1979 who also receive a service pension or have a low pensionable income.
The rate paid depends on the status, on the average of contributions paid (see Question No. 7 below for more details), in some cases on the Pensionable Income as well, and also on whether a person is in receipt of a service pension or not as explained above. A married male (whose wife is not in receipt of a Social Security Pension) is paid a married rate, while all other persons are paid a single rate. If a person is eligible for more than one of the above mentioned pensions, only the most advantageous is paid.
7. How is a contribution average calculated?
In the case of a Two-Thirds Pension, the Contribution Average is the average of the sum of two separate averages over a period of 35 years (Minimum 15, Maximum 50). The first average is derived from the contributions one has in the last ten full calendar years prior to retirement (total contributions divided by 10). The second average is derived from the contributions one has in any twenty five years starting from the year a person reaches 19 years of age to the year immediately preceding the starting year of the last 10 mentioned above (total contributions divided by 25). In the case of all other Retirement Pensions mentioned above, the Contribution Average is the average of contributions one has (Minimum 20 per year, Maximum 50 per year) from the year during which a person reaches age 19.
8. How will the retirement age be affected by the Pensions Reform?
Presently the pensionable age is 60 years for females and 61 years for males and will remain as it is for persons born up to 31st December 1951. With the Pensions Reform, the pensionable age will gradually increase to 65 years as follows:
Persons born during calendar years Pension Age
1952 to 1955 62 years
1956 to 1958 63 years
1959 to 1961 64 years
Post 1961 65 years
9. How will the pensionable income be affected by the Pensions Reform?
The pensionable income is presently calculated as explained in Question No 5. The assessment of the pensionable income will be adjusted as follows:
Employed persons born during calendar years 1952 to 1955 – yearly average salary of the best full 3 consecutive years in the last 11 years prior to retirement. Self-employed / self-occupied persons born as above – yearly average net income of the best 10 consecutive years in the last 11 years prior to retirement.
Employed persons born during calendar years 1956 to 1958 – yearly average of the best full 3 consecutive years in the last 12 years prior to retirement. Self-employed / self-occupied persons born as above – yearly average net income of the best 10 consecutive years in the last 12 years prior to retirement.
Employed persons born during calendar years 1959 to 1961 – yearly average salary of the best 3 consecutive years in the last 13 years prior to retirement. Self-employed / self-occupied persons born as above – yearly average net income of the best 10 consecutive years in the last 13 years prior to retirement.
Employed / self-employed / self-occupied persons born from 1st January 1961 – yearly average salary (employed) or net income (self-employed / self-occupied) of the best 10 years in the last 40 years prior to retirement.
10. Can a person receive a retirement pension if he/she worked abroad?
Malta currently has Social Security Bilateral agreements with Australia, Canada and all EU Member States. This means that if a person worked in Malta and in any of these countries, he / she may be entitled to a Retirement Pension from Malta (under the conditions as explained above) and / or also from any of these countries (under their respective conditions). If a person does not have enough contributions (or working residence periods in the case of Australia) to qualify for a pension either from Malta or from any of these countries, he / she may qualify under the provisions of the above mentioned agreements. In this regard, contributions (or working residence period) in a country are deemed as paid (or spent) in the other country. Since Malta became a member of the EU on the 1st May 2004, the provisions of Regulation 1408/71 applied and this meant that insurance periods in any of the Member States of the EU are being considered for the calculation of social security pension. Similarly, Maltese insurance periods are being considered for pension purposes in any of the Member States.