Types of Pensions

Retirement Pensions

Pensions can be of various types:

1. Retirement pensions refer to pensions that are received upon reaching the mandatory retirement age. The mandatory retirement age differs depending on the year in which an individual was born. In order to assess whether you quality for a retirement pension and whether you have made enough contributions, you can contact the Department of Social Security to confirm number of paid contributions and ensure that any missing contributions are accounted for.
   
2. Overseas Pensions refer to instances where individuals receive pensions for past employment or residence spent outside Malta. All pensions, whether arising in Malta or abroad must be considered as part of taxable income in the year in which they are earned. Considerations must also be given for the potential impact, if any, of any double taxation agreement that which may be in place between Malta and the jurisdiction from which pension payment is earned. Section 7 of this manual discusses the application of selected double taxation agreements presently in force with Malta and their applicability in the case of pension income. 
   

Pension Income from the Department of Social Security

Pensioners submitting a tax return are to declare the income from their local pension, together with all other gross income received during the same year of assessment. With regards to the benefits and allowances issued to pensioners from the Department of Social Security, pensioners should direct any queries they may have to the Department of Social Security as specified under the Social Security Act.

Pensioners who continue to work full-time after retirement age and are thus receiving emoluments from their employer and from the Department of Social Security (as a pension), must declare both incomes in their tax return. The total gross income will then be charged at the applicable personal tax rates, based on that individuals tax status – single, married or parent rate.

A pensioner may also continue to work on a part-time basis after retirement age and still take advantage of the benefits available under the Part-Time Rules. If the pensioner is working part-time, and the part-time employment income does not exceed €10,000, the normal Part-Time Rules apply. As of 1^st January 2022, the tax rate for both part-time employed and part-time self-employed is 10%, up to a threshold of €10,000 and €12,000 respectively. Click on the following link to submit online tax returns for part-time income and benefit from reduced rate of tax on part time income. Further information on part-time income can be found on the following link.

It is important to note that in the case of married taxpayers who both receive pension income, tax may be computed separately using the single rates of tax for married individual. This however is only possible where pensions arise from past employment.