The framework for third pillar pensions was announced during the last Budget in November however since then no products have been launched. The tax benefits for third pillar pensions have been extended to be applicable to certain insurance products in order to incentivise providers.
The prospective providers beneath this new framework will be able to include the tax benefits within their existing products and will not have to invest heavily in new products. Several product providers’ concern was that the €150 per annum of tax credit was not attractive enough to attract non-savers to start saving. This would mean that most of those who make use of the existing scheme would be existing savers who would switch their insurance production order to gain the benefits.
The main criteria for being eligible to get the tax benefit is that the beneficiary needs to be older than 50 but not over 70 years of age or any other age that is specified in the regulations. The Finance Ministry stated that dicussions were held with service providers as well as all stakeholders in order to resolve the issue, however the tax schemed needs to be seen within the context of a lon-running pension scheme that would usually last for over 25 years.
Over this timespan, €150 per annum would amount to €7500 of tax savings when considering a couple’s investment of €50,000 in the scheme for the same amount of time. Furthermore, the Finance Ministry stated that both pension schemes and insurance providers are regulated by the MFSA and therefore the investor’s interest will always be safeguarded as long as all the applicable criteria for being eligible to get tax credit are met.
