Foreign workers financed one-fourth of Maltese pension pot

Before COVID-19 foreign workers in Malta paid out €168 million in social security contributions of the total €735 million paid

Official statistics made available for MaltaToday by the Ministry for Social Justice and Solidarity has shown that 76,866 foreign workers and self-employed persons paid a staggering €168 million in social security contributions in 2019. 

This represented an increase of nearly €30 million over that paid in 2018 by 65,092 foreign contributors. 

Statistics for 2020 showing the full impact of the COVID-19 pandemic’s downturn and numerous lay-offs of foreign workers are not yet available.  

But statistics for the year preceding the pandemic confirm the increasing importance of foreigners in guaranteeing the sustainability of Malta’s pension system. 

Indeed, while compared to 2018 the amount paid by Maltese workers increased by €18 million, the amount paid by foreigners increased by €30 million. 

A comparison with previous years shows the amount of social security contributions paid by foreigners increased by a whopping €89 million since 2017. 

While the number of Maltese contributors only increased by 899 between 2018 and 2019, the number of foreign contributors shot up by 11,774 in the same timeframe. 

Moreover, Maltese male contributors have actually decreased by 687 while the number of female contributors increased by 1,586. 

These statistics confirm that male workers prevail among foreigners working in Malta since 62% of foreign contributors are male. 

Foreign self-employed contributors shot up from 1,678 in 2016 to 2,583 in 2019, which means they now account for 12% of self-employed contributors. However, in terms of social security contributions, foreign self-employed account for 8.5% of the total contribution. 

A comparison with 2018 shows a decrease in the number – 81 – of male self-employed contributors of Maltese nationality. On the other hand, Maltese female self-employed increased by 225. Foreign self-employed males have also increased by 171 while foreign self-employed females have increased by 116. 

Do foreigners get a pension?  

All foreign employees have to pay NI contributions, just like Maltese employees. And when it comes to pensions, they have to meet the same statutory and contributory conditions like the Maltese.  

This does not mean that foreigners are excluded from the pension system. If they do not meet minimum conditions to become eligible for a pension, EU regulations or bilateral agreements may come into place. The former would apply for all EU citizens while the latter, in Malta’s case, would apply for Australians and Canadians only.  

In such cases, the worker may receive a pro-rata pension – based on the period of time during which the prospective pensioner would have worked in Malta and paid contributions.  

Very frequently this would be a low amount, depending on the number of contributions paid. Such persons would also be entitled to other retirement pensions from other countries in which they would have worked.  

Non-EU citizens and Third Country Nationals (TCNs) not covered by any bilateral agreement simply do not qualify for a pension in Malta if they do not meet the same statutory and contributory conditions as the Maltese. 

The result of this is that while foreign employees pay full contributions like all the Maltese employees, they may in future either qualify for a reduced rate of pension or not qualify at all.  

Increasing the pool  

Increasing the pool of workers paying contributions was among the recommendations made by government pensions consultant David Spiteri Gingell.  

In 2011 he pointed out that a shrinking future workforce, due to a lower fertility rate, coupled with a larger elderly population that stems from longer life-expectancy, was painting a very bleak picture for pensions.  

A way of countering the shrinking workforce, Spiteri Gingell maintained, was to boost the workforce through skilled immigrants for certain roles. The pensions working group had also advocated a second pillar pension fund and linking retirement age to longevity.  

But the current Labour government has excluded both measures, banking on the increase of contributions from increased female participation and immigration.  

In 2018 former Prime Minister Joseph Muscat had warned that those who didn’t want more foreigners on the island were also turning their back on economic growth and social measures like pensions. “You cannot cherry-pick economic policies. If you want to enjoy the meat you need to take the bone too.”