Bilateral Agreements on Social Security
Social Security Bilateral Agreements
Bilateral Agreements are formal treaties that help co-ordinate the social security systems of the respective contracting countries. The primary aim is to help people move from one country to another, obtaining benefits due and in some cases also regulating the payment of social security contributions.
The co-ordination of the social security systems of Agreement countries is essential to enable the smooth running of the provisions of the Agreement. One must keep in mind that not all foreign countries have their social security laws based on a contributory system such as that in practice in Malta. A case in point is Australia and to some extent Canada where the social security system is based either wholly (Australia) or partly (Canada) on residence periods and a financial means test.
Coordination of Social Security Systems is achieved in several ways, namely:
- Helping people to satisfy the minimum conditions of a pension scheme in an Agreement country. For example, if a Maltese person had not contributed enough Maltese social security contributions to obtain a pension under the domestic law, the Agreement provides that any period of residence/contributions in the other country shall be deemed to be paid contributory periods under the Maltese scheme. In other words it helps to fill in any missing periods. Hence, the citizen will become entitled to a pension to which he previously had no right. Vice versa the same applies in the country party to the Agreement.
- An Agreement ensures that foreign social security pensions are paid to the beneficiary in Malta when and if he/she decides to return to Malta. For example, where portability of a benefit is restricted, such as in the case of pensions in Australia and Age pensions in Canada, the Agreement overrides this portability restriction and the migrant may return to his mother country bringing with him his Australian/Canadian pension.
- The Agreement may also regulate the payment of social security contributions where both contracting partners enjoy a contributory system. This was necessary in order to avoid the double payment of contributions in signatory countries.
- An Agreement also ensures that the people living in countries covered by the Agreement are treated equally in all agreed aspects of social security as though they were citizens of the respective countries.
- As an Instrument, Agreements define the benefits and rates payable. When utilising the provisions of a Bilateral Agreement to meet the minimum requirements that otherwise would not have been obtained, this does not guarantee that the full rate of pension or benefit otherwise applicable under domestic law will be paid. Every Agreement outlines how pro-rata entitlements are assessed. Basically, the pro-rata rate payable is obtained by multiplying the amount of pension due to a person had the sum of the total contributions/residence in both countries been paid in one country, by the number of contributions/residence in the other country. The result is divided by the total sum of contributions/residence (as the case may be) paid/credited in both countries.
Malta has, to date, signed Social Security Reciprocal Agreements with the United Kingdom, Australia, Canada and New Zealand. Malta has also signed an Agreement (which is not a Bilateral Agreement similar to the other three just mentioned) with Libya on the payment of contributions for Maltese working in Libya.
The Agreements signed by Malta are called bilateral agreements (i.e. between two countries). It has always been the policy of the Department to enter into bilateral agreements rather than multilateral (including various countries).
The Bilateral Agreements with Australia, Canada, United Kingdom and New Zealand include a number of benefits such as Retirement, Invalidity or Widows Pension.
The Reciprocal Agreement with the United Kingdom has been operative since the 7th May 1956 with a revision to this Agreement becoming operative on the 1st September 1996.
Since the UK operates a contributory system similar to Malta, it was not that difficult to co-ordinate both systems. In fact the Agreement with the UK covers the payment of contributions for those residing in one country but working in the other. The Agreement also provides for benefits. It can be said that this is the only Reciprocal Agreement that Malta has with a foreign country which deals with the payment of short term benefits apart also from the usual long term benefits. Under the Agreement one can find benefits such as sickness and unemployment benefits, industrial injuries and contributory pensions in respect of Retirement and Widows. The revised Agreement with UK which came into force in September 1996 has provided a new benefit, the invalidity benefit that was not covered in the original Agreement of 1956.
Following Malta’s EU accession in May 2004, the Bilateral Agreement was superseded by the provisions of the EU Regulations on coordination of Social Security schemes. With effect from the 1st January 2021, following the UK’s exit from the European Union, the Bilateral Agreement has been superseded by the Trade Agreement signed between the EU and the UK. The provisions of the Bilateral Agreement with the UK shall remain applicable only in respect of the territory of Isle of Man and Guernsey.
The Agreement with Australia has been operative since the 1st July 1991. As Australia operates a social security system based on one’s residence and according to a financial means test, the Agreement provides that, where necessary, any residence in Australia is to be considered as deemed periods of contributions in Malta. Vice versa it provides that paid contributions in Malta are deemed periods of residence for Australian social security purposes.
The benefits covered by this Agreement are Contributory pensions in respect of Retirement, Widowhood and Invalidity. Covered also in Malta are the non-contributory pensions and assistance.
The Agreement with Canada came into force from the 1st March 1992. Besides Canada, the Agreement caters also for the residents of Quebec, a territory which forms part of Canada. Canada exercises a dual role Social Security System where it has a Contributory System and a residence bases old age pension system. As in the former Agreements dealt with above, provisions are found where residence in one country becomes contributions in another and vice-versa.
The Agreement deals on Contributory pensions in respect of Retirement, Widowhood and Invalidity, besides Orphan’s and Death benefits. The Malta/Canadian Agreement also has regulations regarding the payment of social security contributions in those cases where a resident of one country is working in the other.
With regards to the Agreement with Libya (which, as stated, is a limited type of a Reciprocal Agreement since it does not provide for reciprocity on all benefits) came into force on the 1st February 1990. This Agreement was to supersede a previous Agreement signed on the 5th October 1972 and which had not been functioning due to various difficulties that had brought it to a stalemate.
Whilst the first Agreement had ensured that contributions paid in Libya were valid for Maltese Social Security reasons, the second one changed all this and it was agreed that no Maltese worker would need to pay Social Security contributions whilst working in Libya. This Agreement now safeguards the Maltese employee’s position and he need only pay social security contributions in Malta.
It is the Ministry’s intention to secure new reciprocal agreements in the field of Social Security with other strategic countries.
On 8th July 2013, a new Bilateral Agreement on Social Security between Malta and New Zealand was signed. The Agreement includes provisions related to the legislation which is covered, in the case of Malta, the Social Security Act (Cap. 318), the persons to whom the agreement applies which includes any person who has completed a period of Maltese contributions or a period of New Zealand working age residence, as well as dependants or survivors of such persons. The Agreement also provides for equality of treatment meaning that persons covered by the Agreement are to be treated equally with regards to rights and obligations under the legislation of Malta and New Zealand. The benefits covered under the Agreement are pensions in respect of retirement and widowhood for Malta, and superannuation and veteran’s pensions for New Zealand.
Under the Agreement, a person may move between Malta and New Zealand without losing his pension. Also the Agreement will help persons to satisfy the minimum conditions of a pension scheme in both Malta and New Zealand. For example, if a Maltese person had not contributed enough Maltese social security contributions to obtain a pension under the Maltese legislation, the Agreement provides that any period of working age residence in New Zealand shall be deemed to be paid contributory periods under the Maltese scheme. In other words it helps to fill in any missing periods. Hence, the citizen will become entitled to a pension to which he previously was not eligible. Vice versa the same applies in the country party to the Agreement.
The Agreement also ensures that pensions paid by New Zealand are paid to the beneficiary in Malta when and if he/she decides to return to Malta. For example, where portability of a benefit is restricted, such as in the case of New Zealand, the Agreement overrides this portability restriction and the migrant may return to Malta and be paid his New Zealand pension in Malta.