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Your State Pension explained
What is the State Pension?
The State Pension is simply the pension paid by the Government to anyone at retirement age who meets the necessary eligibility conditions. There are numerous forms of State Pension but the main one in Malta is commonly referred to as the 'Two Thirds Pension'.

Am I eligible?
Most people are entitled to a State Pension of some sort. In order to qualify for the Two Thirds Pension you must:
  • Have been in employment for at least ten years prior to retirement
  • Have paid the proper rate of National Insurance contributions
  • Have paid an average of at least 50 (out of a possible of 52) National Insurance contributions each year, over the required contribution period.
What age can I retire?
It's up to you what age you retire, but the earlier you want to give up work the more money you are going to need because it will have to last longer. The State Pension is paid from 61 for males and 60 for females; however this is increasing in the future to age 65. The exact age you can take the State Pension depends on the year you were born:

Year of Birth State Retirement Age
1951 or before Males 61, Females 60
1953 - 1955 62 Same retirement age for both males and females
1956 - 1958 63 Same retirement age for both males and females
1959 - 1961 64 Same retirement age for both males and females
1962 or after 65 Same retirement age for both males and females

If you were born in or before 1951, you cannot take your State Pension before age 61 (males) or 60 (females).
If you were born in or after 1952, you are allowed to take your pension from age 61 as long as you have paid sufficient National Insurance Contributions and stop working.

Many people like to retire much earlier than their State Retirement Age, and some people manage to do it by ensuring they have sufficient money to bridge the gap between stopping work and receiving the State Pension.

How much will I get?
The amount of pension you receive from the Government depends on how many National Insurance contributions you have made and what your earnings have been.

The Two Thirds State Pension aims to pay you a pension equivalent to two-thirds of your salary but, because of certain eligibility conditions and a cap on the earnings you can use, it is unlikely that you will actually receive two-thirds of your final salary.

You may not receive two-thirds of your salary if:
  • You have not paid sufficient National Insurance contributions, or
  • Your salary exceeds the 'Maximum Pensionable Income'
In 2006 the maximum Two Thirds Pension was €208.18 a week. However in reality the amount people actually receive is normally less than this. In 2005 for example the average pension paid by the Government was €104.82 a week, which is just €14.95 a day. Would you want to live on this for the rest of your life (Source: Data extracted from "Social Security in Malta - a synopsis, 2006")

What is the maximum income?
The Government sets a limit on the maximum amount of income you can use for calculating your pension. The cap in 2007 is €16,207.78 but is set to increase in the future:

Year of Birth Maximum Pensionable Income
1951 or before €16,207.78 increased by COLA up to a maximum of €17,470.30
1952 - 1961 €16,207.78 increased by COLA up to a maximum of €20,964.36
1962 or after €20,964.36 increased in line with 70% wages and 30% inflation
COLA = Cost Of Living Adjustment

If your earnings are greater than the maximum Pensionable Income then you cannot ever receive two-thirds of your final salary as a pension from the Government. You will only receive up to two-thirds of whatever the maximum Pensionable Income is at the time you retire.

For Example
If your average salary when you stop work is €27,952.48 and you have made sufficient contributions to entitle you to the full Two Thirds Pension, then if you retired in 2007 you would only receive €10,803.63, i.e. 2/3rds of the maximum Pensionable Income in 2007.

This would equate to only 38% of your average salary, not the two-thirds you might have been expecting.

What about a lump sum?
Many people look forward to receiving a lump sum of money when they retire, maybe to buy a new car, take that holiday of a lifetime or to invest for additional income. Unfortunately the State Pension only provides an income, not a lump sum, so if you would like to treat yourself when you retire you should be making additional savings.

Where can I get further information?
For more information about your entitlement to State Pensions you should contact:
The Social Security Directorate General
38 Ordinance Street
Valletta VLT 01
Malta
Telephone (+356)2590 3000
Fax (+356) 2590 3001
E-mail: [email protected]
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Bank of Valletta p.l.c. is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap. 371 of the Laws of Malta) and the Investment Services Act (Cap.370. of the Laws of Malta).