Issue link: https://maltatoday.uberflip.com/i/1542413
2 maltatoday | WEDNESDAY • 7 JANUARY 2026 NEWS Demographic trends, housing vulnerabilities could strain pensions system - report CONTINUES FROM PAGE 1 In 2023, Maltese nationals accounted for 166,420 contrib- utors, while foreign nation- als—particularly third-country migrants—hit record levels, reflecting the system's depend- ence on migration to maintain fiscal equilibrium. The review stresses that migration policy and labour participation remain central to pension sustainabili- ty, as foreign workers now con- stitute a growing share of con- tributors and play a vital role in keeping the system in balance. A short-term advantage High turnover among foreign workers, often seen as a la- bour market challenge due to skills shortages, paradoxically strengthens fiscal sustainability. Roughly half of all migrant contributors leave Malta with- in two years, and most never meet the 10-year contribution threshold required to qualify for a pro-rata contributory pen- sion. Of nearly 245,000 foreign contributors between 2008 and 2023, only 5,736—or 2.3%— earned pension entitlements. This dynamic allows the state to collect contributions without creating long-term expenditure obligations, providing immedi- ate revenue with minimal future liabilities. The report notes conventional international models, includ- ing Eurostat projections, of- ten overstate Malta's pension burden by assuming migrants will remain and retire locally. In practice, the high turnover prevents the surge in public pension spending that was once forecast to grow nearly four times faster than the EU aver- age by 2050. Despite this short-term advan- tage, structural vulnerabilities remain. Foreign workers gen- erally have lower contribution densities than Maltese nation- als, averaging 22.7 weeks per year compared with 37.3, leav- ing the system sensitive to fluc- tuations in migration flows. As Malta's population ages and the working-age share declines— from 63% today to a projected 51% by 2070—the report warns that migration alone will not suffice to sustain pensions over the long term. Renters among most vulnerable By 2024, a single pensioner's expenses for an augmented basket of goods—including lei- sure activities and private car ownership—averaged €11,439 annually. While two-thirds of pension recipients surpass this threshold, minimum pension- ers often rely on supplementary benefits such as the Senior Cit- izen Grant or Supplementary Allowance to cover essential ex- penses. When these benefits are factored in, most households have kept pace with rising living costs since 2020. However, housing costs have emerged as a critical factor af- fecting pension adequacy. Pen- sioners paying unsubsidised market rents are identified as the most financially vulnerable, with the report noting that "on- ly among pensioner households that pay rent does the ratio [of households able to cover key expenses] remain below 80%." The review highlights a meth- odological gap in measuring "decent living," pointing to the General Workers' Union's Na- tional Living Income study, which produces significantly higher estimates than other models because it incorporates private market rents rather than assuming subsidised housing. To address this gap, the review suggests potentially streamlin- ing multiple benefits into a sin- gle basic, guaranteed income for vulnerable households. Elder- ly households that do not own their residence, especially those with low financial assets, are a category of particular interest. Streamlined benefits could also be paid more frequently, pro- viding steadier income flows and reducing vulnerability to unexpected expenses. Second pillar auto enrolment To strengthen both adequacy and sustainability, the review recommends a set of reforms. Diversifying retirement in- come through private pension auto-enrolment could reduce long-term pressure on the state system. This includes an au- to-enrolment private pension system where employers pro- vide pension plans but employ- ees retain the choice to decline. The report also advocates re- vising child-rearing credits to protect parents, particularly women with disabled children, from losing entitlements. Link- ing the Guaranteed National Minimum Pension to poverty thresholds is suggested to pre- vent old-age destitution, and continued investment in the ĠEMMA financial literacy pro- gramme would equip citizens to plan for decades-long retire- ments. The review proposes a uni- form adjustment mechanism linking annual increases in pen- sions to 70% wage growth and 30% inflation, ensuring pension values rise in line with econom- ic prosperity rather than solely with price increases. A gradual adjustment of widows' pensions until they reach full parity with the deceased spouse's entitle- ment is also recommended. Contribution requirements The review examines long- term workforce challenges, not- ing the increase in the required contributions for a full contrib- utory pension—from 41 to 42 years for those born between 1969 and 1975—already intro- duced in 2024. The review proposes a pub- lic consultation on this change to assess whether the 42-year requirement remains fair and achievable for the modern workforce. Importantly, the re- view excludes any mandatory increase in social security con- tribution rates, aligning with the current administration's elec- toral mandate, and instead ad- vocates supplementary private savings through auto-enrol- ment rather than a compulsory second pillar for all workers and employers. Prepared by the Pension Strat- egy Group (PSG)—a team of senior officials and technical ex- perts chaired by permanent sec- retary Mark Musù—the report was issued for public consulta- tion and provides a detailed as- sessment of Malta's current and projected pension landscape. The PSG includes senior Cen- tral Bank economists and other technical specialists tasked with analysing system performance and recommending reforms. The public is being invited to provide feedback on the report by 3 April 2026. The report emphasizes the crucial role of foreign workers in maintaining Malta's pay-as-you-go pension system High turnover among foreign workers, often seen as a labour market challenge due to skills shortages, paradoxically strengthens fiscal sustainability