An Expert Explains: Tax rebates on personal pension plans

There are plenty of reasons why one should start planning for their retirement. Chief among these is the concern that the state pension will not be adequate to maintain a decent quality of life, with those on higher incomes most likely to face a substantial drop in their income.

To encourage individuals to take on the responsibility of planning for their own future, Malta offers attractive incentives that make the decision to put away some money for retirement an easier one.

In this series of articles aimed at demystifying the world of pensions, BOV Manager within the Bancassurance Office Claire Falzon has explained what private pensions are, delved into pension adequacy, and how you can get one going.

Here, she outlines the tax benefits available to those who want to start planning for their retirement.

“In Malta, individuals who contribute to an eligible personal pension plan can potentially benefit from a tax rebate which is meant to encourage individuals to save for their retirement.

“The tax rebate currently stands at 25 per cent of the contributions effected in any given year, up to a maximum contribution of €3,000 per year.

“Therefore, the maximum tax rebate on a personal pension is €750 per year.

“These may be subject to change over time. Tax rebates will be received towards the end of every year on the basis of previous year’s contributions.

“It is advised to seek guidance from a tax professional, to understand how the specific rules on private pensions affect your specific situation.”

An Expert Explains is a BusinessNow.mt initiative to improve economic financial literacy by inviting industry leaders to explain technical terms in a manner that can be understood by a general audience. If you would like to suggest a term or concept for our network of professionals to break down, or if you are an expert willing to contribute to this column, send us a message on our Facebook Page.