Private pension schemes launched to 'incentivise' people to save money

Finance minister Edward Scicluna launched the Third Pillar pension scheme, referred to as the Personal Retirement Scheme, to be supplemented by another scheme, the Individual Savings Account (ISA).

Both schemes are optional and are intended to encourage low-income earners to save more for their retirement and safeguard their future quality of life.

Speaking during the launch of the two third pillar pension incentives on Wednesday 12 November 2014, Minister Scicluna said that these were being launched following the establishment of a regulatory framework for private pensions by the MFSA.

"The fiscal incentives would be tied to private pension products to be offered by local banks and other financial institutions, and that the incentives were drawn up following the work carried out by a working group established to address the pension issue.

“The introduction of the Third Pillar Pension scheme is the result of a detailed study and a long consultation process carried out with the stakeholders,” Scicluna said.

The first scheme, the Personal Retirement Scheme, is the provision of an annual €2,000 tax credit, with benefits of up to €300 per family. These schemes need to operate under the Retirement Pension act and the benefit payment shall not start earlier than age 50, or later than age 70.

The second scheme, the Individual Savings Account (ISA), provides families the option to open a tax free savings account with up to €2,000 per year per couple invested in such accounts. Individuals can withdraw funds from such accounts any time, similar to a normal savings account.

Scicluna underlined that the introduction of the Third Pension Pillar is a government promise aimed to encourage the provision of adequate revenues during retirement, while at the same time safeguarding the long-term sustainability of the pension system.