International Pensions

The Special Funds (Regulation) Act, 2002 (“Act“) which came into force on 1st October 2002 aims at facilitating the establishment of funded second pillar retirement arrangements.

The Act provides a regulatory framework for the arrangement pursuant to which an employer or contributor promises the employee or beneficiary retirement benefits. The said legislation also allows for the registration of investment vehicles (called Retirement Funds) through which Retirement Schemes can hold and invest any contributions received. It also provides for the registration of various service providers that may provide services in connection with a registered Retirement Scheme and/or Retirement Fund.

The Act allows the establishment of pension schemes in the form of: [a] trusts; [b] by contract or [c] SICAV.  Pension schemes can be in the form of occupational or personal pension schemes, and they can be of a ‘defined benefit’ or ‘defined contribution’ type.

This legislation transposes Directive 2003/41/EC on the activities and supervision of institutions for occupational retirement provision thereby allowing occupational Retirement Schemes registered in Malta to passport out their activities to other EU member states.   This implies the establishment of cross border occupational Pension Schemes in fellow member states subject to a minimum standard framework for the regulation and supervision of such schemes that must be applied in each state. This allows pension schemes registered in Malta to receive contributions from employers located in fellow member or EEA states and to provide benefits to the employees of the employer.

Revision of the Legislation

The new Retirement Pensions Act which is currently making its way through the Maltese Parliament and new Rules established under the Act will replace the Special Funds (Regulation) Act, 2002. The scope of the Retirement Pensions Act is to create a more flexible and user friendly piece of legislation, rather than undertaking a complete overhaul or make drastic changes to the current legislation. Moreover, it aims to set out a framework for pension legislation that will allow it to attract multinationals, high net worth individuals and wealthy expatriate individuals to base their pension provisions in Malta and benefit from a well-regulated, cost-competitive structure within a tax efficient framework.

Recent Developments

HM Revenue & Customs has recently confirmed that Retirement Schemes established in Malta and regulated by the Malta Financial Services Authority may be considered on a case by case basis for Qualifying Recognised Overseas Pension Schemes under UK Law.

A QROPS is a pension scheme set up and regulated outside the UK, recognized by HMRC as broadly equivalent to a UK Registered Pension Scheme. It allows persons who are no longer resident in the UK to transfer pension benefits accumulated in a UK recognised pension scheme to a recognised pension scheme outside the UK. This can give many employers and their employees more tax flexibility on these benefits, provided certain requirements are met. The same advantages apply to individuals no longer resident in the UK who receive benefits from their personal pension schemes.

Solutions for Multinationals

For major multinationals, administering pension schemes in multi jurisdictions can be an expensive and highly complex process. This presents a key opportunity to introduce an international pension solution that enables multinationals to use Malta as a centre from which to manage and centralise their retirement benefits schemes and consolidate their employee pension schemes benefiting from greater economies of scale, while achieving sizeable cost savings by operating from one jurisdiction under one regulatory regime.

As a member of the EU Malta provides a pan European platform that is secure, well regulated, and innovative. Backed up by a professional support structure and experienced skills base, Malta’s anticipated new pensions legislation is widely expected to be well received internationally and industry insiders are keeping a sharp focus on the provision of international pensions as the next major development in the jurisdiction’s financial services offerings.