Malta’s pension entitlements reach €25.1b in 2016

Malta’s pension entitlements reached €25.1b by the end of 2016, the equivalent to 242.3% of gross domestic product (GDP), according to figures published by the National Statistics Office (NSO) in a report.

The majority of these entitlements was accumulated by members of the Social Security Pension System, with €22.6b (90%) of the total entitlements covering social security pensions. Between 2012 and 2016, social security pension entitlements rose by €4.8b, which reflects a growing trend in employment, the NSO says.

Treasury entitlements dropped by €0.1b and represented 10% of the total pension entitlements by the end of 2016. The decline is a result of the treasury pension being replaced by the two-thirds pension in 1979 and hence closed to any new government employees, as the NSO report clarifies the system.

Furthermore, an increasing number of employees in recent years has become eligible to receive a treasury pension, reaching retirement age and without being required to further contribute to the system.

In addition, social contributions in 2016 paid under the Social Security Pension System totalled €1.6b, reflecting an increase of more than €0.4b from 2012. Total pension payments amounted to €0.7b by the end of 2016, more than three-quarters of which was used to cover old-age-type pensions.

However, treasury pension entitlements dropped by €0.1b between 2012 and 2016, from €2.6b in 2012 to €2.5b in 2016, following a decline in contributors to the treasury system registered between 2015 and 2016, according to the NSO figures.

Pension payments for the year 2015 totalled €0.1b, almost all of which was used to cover old-age-type pensions. In addition to the standard discount rate of 3%, different discount rates were also applied to the accrued-to-date pension entitlements (ADLs) model to test its robustness. ADLs represent the current value of pensions to be paid out in future periods based on rights accumulated by each contributor during his or her working life, according to the NSO.

In fact, entitlements were recalculated using discount rates of 2% and 4%, with results showing that a higher discount rate leads to a lower present value of pension entitlements, implying that the two variables are inversely correlated.

For this reason, 2016 pension obligations amounted to €20.6b when a discount rate of 4% was used; €4.4b lower than the original entitlements computed using the standard 3% discount rate. The opposite was true when a 2% rate was applied with pension entitlements rising to €31.1b by the end of 2016.

International scope

Comparing internationally, Malta’s pension entitlements amounted to 257.2% of GDP in 2015, ranking it in 11th place among the 29 European countries — 26 European Union member states, Iceland, Norway and Switzerland — that have currently published the data, as the NSO press statement says.

The United Kingdom recorded the largest ratio of entitlements-to-GDP with 402%, followed by Austria (376.2%) and France (368.8%).

At the other end of the spectrum, Denmark registered the lowest share with their obligations amounting to 95.9% of its GDP by the end of 2015.

The full report including charts and visual representation of data is available for download at the website of NSO.