A recent editorial questioned the fairness of third-country nationals paying social security contributions. These people do not receive pension-related benefits as they are unlikely to have worked the legal minimum for eligibility.

Unlike EU workers, their social security contributions cannot be transferred, hence they are ‘lost’ in the Maltese system, which in turn would have already used them to pay pensions for locals.

However, it is also legal for third-country nationals not to pay social security contributions. The problem is that most employees have no idea that this is possible and how to do it. Nor is it in the Maltese government’s (and employees’) interest for them to know how.

Effectively, when an employee keeps paying contributions in their own country and has private insurance in Malta (which they still need anyway), they can obtain an official exemption. This has to be presented to the employer and renewed annually.

The question is, why would any sane Maltese person recommend this course of action, unless it is purely because they feel for these people who are supporting their families back home.

Malta’s social security and pension systems are deeply flawed. Today’s pension system was largely devised in the 1970s, with the last tweaks being an increase in pension age in 2006.

Back when the system was introduced, people used to live shorter lives, hence taking fewer pensions out of the system. They also had more children, and at a significantly younger age, with only one partner working. Someone on a pension was likely to have two generations working for them. The sustainability of pensions was built on the fact that there were around four to seven people working for each active pensioner.

Let us walk together through Malta’s scenario if we took away third-country nationals and EU citizens (who will still be given their contributions).

Malta’s fertility rate currently stands at 1.13, meaning women on average are likely to have around one child in their lifetime. The average age of becoming a mother has also increased to about 31.

Furthermore, it is more likely that both partners will work, making both eligible for a pension.

It is legal for third-country nationals not to pay social security contributions- Jonathan Mifsud

By the time they reach the pension age of 65, a couple would on average have one child (aged 34) and one grandchild (aged 3). Effectively, only one person is now paying contributions for their pensions. Keep in mind that the contribution is of 20 per cent split between the employee and employer up to the maximum pensionable income (Category D Contribution).

It is only when they are about 83 that the great-grandchild would be expected to join the labour force. However, the average life expectancy is 82.65.

Although I do feel it is unfair for third-country nationals to pay and ‘lose’ their contributions, this very analysis showcases the lack of sustainability of today’s pension model, if we take away the foreign workers introduced by Clyde Caruana in his strategy back at JobsPlus a few years ago. There’s very little left to ensure we can maintain pensions.

That is without discussing the other flaws and shortcomings of our social security system, from taking contributions only on the full-time basic income, ignoring overtime, bonuses, allowances and secondary part-time employment. While also capping contributions to the maximum pensionable income.

I do hope that this creates a discussion, which leads to the revision of social security contributions, to hopefully create a fund, which can self-sustain itself in a way that we pay towards tomorrow’s pensioners instead of those of yesteryear.

Jonathan Mifsud, co-founder and CTO of HR and payroll software Buddy, helps educate employees about their rights through the TikTok channel BuddyPayroll.

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