• Pensions to rise by €15 a week
• Changes to the way pre-1962 pensions are calculated
• Incentives for workers who delay retirement

Senior citizens will next year see their pension rise for the ninth year in a row, with a weekly increase of €15 or €780 annually, the finance minister announced in the Budget speech.

"This is the biggest increase pensioners have ever received in one year," Clyde Caruana said. 

The €15 rise includes the €12.81 cost-of-living adjustment, meaning that €2.19 is the additional increase.

In the budget for this year, pensions had gone up by €12.50 a week.

Caruana also announced that an adjustment would be made in the pension calculation for those born before 1962, with the first pension increases to be seen next year, over and above the €15 raise being given to all pensioners.  

Earlier this year, Independent candidate Arnold Cassola warned that a limit in the pensions formula for those born before 1962 would effectively “freeze” the pensions of those people.  

But Caruana announced in his speech on Monday that as from next year the same pensions formula that applies for those born after 1962 will apply for those who were born before that date.

Furthermore, the minister said, the former government had capped the highest pensionable income for those pensioners at €6,407 less than those born after 1962. This would be addressed gradually, and as from next year those born before 1962 who would have had a higher salary than the maximum pensionable income would receive a higher pension according to what their current salary would have been. Some 10,000 pensioners are expected to benefit.  

Improved incentive for those who put off retirement

The finance minister also announced improved financial incentives for those who opt to continue working instead of taking a pension.

The scheme currently sees a 5% pension top-up for those who postpone their retirement by a year, rising to 23% for those who postpone their pension by four years.

Caruana said the scheme had seen those retiring at 61 drop by half. 

From 2024 those who postpone their retirement by a year with get a pension top-up of 6.5%. The top-up rises to 13.5% for those who postpone by two years (3% more than present).

Those who postpone retirement by three years will get an additional 21% (an increase of 4.5%) while the increase for a postponement of four years will be 29% (6% more than present).

Bonus for those who do not qualify for a pension

Caruana also announced that the bonus for those who do not qualify for a pension because of insufficient social security contributions will rise from €450 to €500 for those who paid contributions for between one and four years.

Those who paid contributions for between five and nine years will see their bonus rise from €550 to €600 annually. The measure will benefit 16,000 people. 

Third pillar pensions

The minister also announced that talks are being held among the social partners on third pillar pension schemes and he hoped to introduce legislation next year which would see all workers of a certain age automatically enrolled in third pillar pension schemes, with the possibility of an opt-out. 

Service pensions 

Caruana said service pensions will increase by a further €200, as was the case last year.   

Widows pensions would, as from next year not be taxable for widows who have not yet turned 61. Furthermore, the process started last year which would see widows receiving a pension equivalent to what their spouse would have received, would be continued.

Grant for the elderly

Caruana also announced an increase in the grant given to the elderly and those who pay their way to live in old people's homes.

The grant for those aged 80 and over will rise by €50 to €450 per year.

Those aged between 75 and 80 will continue to receive €300 a year. 

Lower tax for those receiving a pension while working

The finance minister announced that further to a scheme announced last year, there will be further tax deductions for those receiving a pension while working.

For next year, the pension amount that will not be calculated for tax purposes will rise by 20% to 60%.

This will mean that some 17,000 active pensioners will see a total increase in their income of €27 million.