Cookies
This website uses cookies in order to improve user experience. Please click 'I accept' to consent the use of this technology by Bank of Valletta p.l.c. Click here for more information on cookies or to view the Bank's Privacy Notice.
Get in touch - Bank of Valletta - BOV Group
Customer Service Centre - Bank of Valletta - BOV Group
  • ... >
  • ... >
  • ... >
  • ... >
  • ... >
  • ... >
  • ... >
  • ... >
  • ... >
  • ... >
  • ... >
  • ... >
  • ... >
  • ... >
  • ... >
  • ... >
  • ... >
Maximise Banner
Minimise Banner
next Previous
next Previous
next Previous
next Previous
Will my Pension be enough?
28 May 2019
Retirement is a phase in life which most people look forward to. And after years of hard work, most people imagine themselves living in a comfortable manner, at least at the level of comfort enjoyed prior to retirement. But will that be the case?

It is an accepted fact that a person will require at least two thirds of pre-retirement income in order to maintain the same level of lifestyle upon retirement. While some might argue that old age would bring new additional costs, these will be largely offset by other costs which end upon retirement, mainly the end of bank loan repayments, which usually do not go beyond retirement age, as well as commuting costs amongst others. However, not everyone will be eligible to receive two thirds of their current income, mainly for the fact that the state pension is capped. In fact, as at 2019, the maximum pensionable income stands at €24,194 for those born after 1962. This will provide a maximum state pension of €16,129. It therefore stands to reason that all those persons earning more than €24,194 will be short of their two thirds state pension. The higher their income, the higher the shortfall. Based on our accepted argument, a person earning €30,000 would require an income of €20,000 upon retirement in order to maintain their pre-retirement lifestyle, of which only €16,000 will be provided by the state as at 2019, leaving a shortfall of €4000 for a seamless transition towards retirement or else having to take the difficult decision to let go of the lifestyle one would be accustomed to. Unless one has other sources of income, going into retirement will result in a financial shock. 

For these reasons the government through the Ministry of Finance has in recent years introduced tax incentives for private individuals opting to invest into a private pension in Malta. As from 2019, these tax incentives have become even more attractive whereby an individual may be eligible for a 25% tax rebate on a private pension contribution of €2000 for a maximum tax credit of €500 p.a. A private pension cannot be accessed prior to a person reaching 50 years of age and not later than 75 years of age. The aim of such limitations combined with the tax incentives is to ensure as much as possible that an individual gets to retirement age with a pot of savings to supplement the state pension. When the time arrives to access the private pension plan, 30% of the pot is payable to the individual as a lump sum tax free, while the remaining 70% are receivable by the pension plan holder over a number of years based on the individual’s age and life expectancy. The annual receivable amount is taxable as part of the person’s annual income and in accordance to the income tax rates as stipulated by the Inland Revenue Department. 

A further development on private pensions has been the extension of the same tax incentives which are applicable to private individuals to corporates and employers. Meaning that employers will be eligible to receive the same tax credits for contributions for their employees towards a workplace pension. Better known as Voluntary Occupational Pension Schemes, or Workplace Pensions, these usually work best when contributions are effected by both the employer as well as the employee. Workplace pensions are an effective tool for employers to gain an edge over competition to attract the best talent in the market as well as to try to keep their best employees from leaving their job. This is more so true in this current day and age whereby the demand for specialised and skilled workers is very high and supply is low. Workplace pensions are usually transferable from one employer to another whenever a person changes jobs. Workplace pensions are already being negotiated as part of new collective agreements, and going forward this is set to be on the increase and eventually a standard clause in every agreement.

For more information on how you can plan for your retirement, contact [email protected] or visit your BOV Branch or BOV Investment Centre. 

This article was written by Mario Farrugia and was first published on the Sunday Times of Malta 26th May 2019.

Mario Farrugia FCII is a Fellow in Insurance and a Chartered Insurance Practitioner with 30 years experience in banking and insurance. He currently heads the Bancassurance business at Bank of Valletta p.l.c.

This article is not and should not be construed as an offer or recommendation to sell or solicitation of an offer to purchase or subscribe for any investment or pension plan. The writer and the Company have obtained the information contained in this document from sources they believe to be reliable but they have not independently verified the information contained herein and therefore its accuracy cannot be guaranteed. The writer and the Company make no guarantees, representations or warranties and accept no responsibility or liability as to the accuracy or completeness of the information contained in this document. They have no obligation to update, modify or amend this article or to otherwise notify a reader thereof in the event that any matter stated therein, or any opinion, projection, forecast or estimate set for the herein changes or subsequently becomes inaccurate. Furthermore, past performance is not necessarily indicative of future results. The value of investments may go down as well as up and may be affected by changes in currency exchange rates. 

Terms and conditions are available from www.bov.com. Issued by Bank of Valletta p.l.c., 58, Triq San Zakkarija, Il-Belt Valletta VLT 1130. Bank of Valletta p.l.c. is a public limited company regulated by the Malta Financial Services Authority 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).
Share this item:
Print page
Sort reviews by:
This item has no reviews yet.
My Guide has identified the following related material
next Previous
 
BOV Pjazza
next Previous
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).