Saving towards a Sustainable Pension

For most of us retirement stage may be seen as too far ahead, however we all agree that time flies and when we eventually reach this milestone we would surely deserve to enjoy this period of our life to the full.

The amount of savings that we would need depends on what we wish to do at retirement. While we appreciate that our expectations may differ, at the least, the majority of us would wish to retain the same lifestyle we enjoyed during our hard-working lives.

During retirement we should be able to live comfortably and maintain this lifestyle with two-thirds of the annual income we would have earned in our last years of employment. This is because by that time certain financial commitments such as home loans, the cost of raising and maintaining dependents and other work-related expenses would have ended.

In view that the pensionable income is capped to a maximum, if we are not eligible for the maximum state pension or if our pre-retirement income is higher than the maximum pensionable income, then we will not receive two-thirds of our pre-retirement income as a pension. In this case we would need to access our own life-long savings to make up for this shortfall and since life expectancy is constantly increasing we would be running the risk of depleting all our savings.

At retirement age we would need sufficient income to last us the rest of our life-time. There are products available in the market which are specifically aimed at planning for a future pension. These personal pension plans, which are totally voluntary and include tax incentives were first introduced in Malta in 2015. In a drive to encourage saving for retirement, especially to complement the state pension, the Government had increased the tax credits on contributions to 25%. As has been announced in the 2021 budget, the maximum tax exempt threshold has also been increased from €2,000 to €3,000 per year. This effectively means that individuals saving towards a personal pension plan in 2021 may benefit from a tax credit of up to €750 per year.

As long-standing tied insurance intermediaries of MAPFRE MSV Life, we may offer any of the two types of Personal Pension Plans: the ‘With-Profits’ version – a cautious and stable type of plan which invests in the MMSV With-Profits Fund or the ‘Unit-Linked’ version – a more dynamic type of plan which invests in a wide selection of funds, chosen by the individual.

Putting money aside for our retirement should be one of our greatest investments and the earlier we start the greater the potential of building a sufficient pension pot. As gainfully employed individuals interested in pension planning, this is an opportunity to save for retirement and benefit from these tax credits.


Joanna Azzopardi is a Manager at Jesmond Mizzi Financial Advisors Limited (JMFA). This article does not intend to give investment advice and the contents therein should not be construed as such. Tax treatment depends on the individual circumstances. Tax legislation & the amount of rebate may change in the future. JMFA (C30176) is an enrolled Tied Insurance Intermediary under the Insurance Distribution Act, Cap 487 of the Laws of Malta for MAPFRE MSV Life p.l.c. (MMSV). MMSV (C15722) is authorised under the Insurance Business Act, Cap 403 of the Laws of Malta. Both entities are regulated by the Malta Financial Services Authority. The Products are manufactured by MMSV and distributed by JMFA. For further information contact JMFA on Tel: 8007 2206, or email [email protected]