A €15.2m rise in contributory benefits spending was the catalyst for the increase, partially offset by a €0.2m drop in non-contributory expenditure.

In addition, contributory benefits outlay totalled €415.3m, reflecting a 3.8% increase from 2018. This was due to a €13.1m rise reported under pensions in respect of retirement, the result of a higher number of two-thirds pensioners, followed by growth in contributory bonus (€1.5m) and pensions in respect of widowhood (€1m).

On the contrary, the outlay was down in pensions in respect of invalidity (€0.3m) and other benefits (€0.1m). Furthermore, non-contributory spending amounted to €96.7m, which was 0.2% lower than during the same period in 2018.

The social assistance registered the biggest drop in the expenditure of €3.1m, while minor drops were reported in supplementary assistance (€0.3m) and child allowance (€0.1m). Nevertheless, increased outlay was reported under disability pension/allowance (€1.5m), old age pension (€1.3m), in-work benefit (€0.4m) and medical assistance (€0.1m).

Between April and June 2019, social security benefits outlay reached €282.3m, 82.6% of which was spent on contributory benefits.

It represented a €9.1m rise from the €273.2m recorded during the Q2 2018 and was the result of an €8.8m increase in the contributory pensions in respect of retirement.

Fewer beneficiaries

The national minimum pension of widows reported the largest drop in beneficiaries with 433 fewer people in the first half of the year as compared to the corresponding period of 2018. At the same time, a 1,489 drop in beneficiaries occurred, representing the largest among the twenty-three active non-contributory benefits.

The largest share of non-contributory recipients was registered under children’s allowance (40,549). At the same time, in-work benefit recipients exhibited the largest increase of 626, rising from 3,497 in 2018 to 4,123 a year later.

During Q2 2019, the two-thirds pension (49,278) and children’s allowance (39,705) reported the largest cohorts of contributory and non-contributory beneficiaries respectively.

The full report with charts and tables is available for download at the website of NSO.

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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.

The post Malta’s pension entitlements reach €25.1b in 2016 first appeared on The Malta Business Weekly.