Employees should be enrolled in an obligatory occupational pension system, according to a strategy document for financial services that has the government’s backing.

Under the plan employees would be able to opt out of the second pillar pension system, replacing the current voluntary system.

This will relieve pressure on government pension systems, encourage savings and create local investable assets that can support further infrastructure development.

This is one of 175 initiatives in the long-term strategy published on Wednesday and developed since 2021 when working groups were created by the Malta Financial Services Advisory Council (MFSAC).

According to the document, the creation of a proper local second and third-pillar pensions industry that adequately supports the statutory pension is one of the crucial milestones that Malta needs to achieve. 

Efforts have been made over the years, but the incentives remain insufficient to stimulate consumers to save for their retirement, the document says.

To this end, it proposes the creation of incentives to make savings in pensions attractive from an employer and employee perspective, encouraging them to forfeit current income for long-term, future returns. It acknowledges that while this carries a cost to the government in the short term, there is a significant longer-term benefit in reducing pressure on state pensions in future.

'Watershed moment'

Consultant Pier Massa described the strategy as a “watershed moment” for the financial services sector and its future. He said it would prepare the island to become more competitive while strengthening its position and addressing weaknesses that will transform a sector that contributes €1.24 billion to the Maltese economy.

The strategy was developed by the main stakeholders, including regulatory authorities. The first step of the strategy was to address the opportunities for change while developing new opportunities through a robust regulatory framework that will strengthen Malta’s reputation in the sector.

The long-term vision is for Malta to be seen as a competitive, secure and competitive financial services destination. This is meant to drive growth for the industry and spur growth in other areas related to the sector.

“The momentum for change continues to be tremendous,” Massa said.  

The core principles supporting the vision are anchored around speed, standards, simplification, specialisation and sustainability. These areas will all be critical for Malta to leapfrog to the next generation service offering in the industry, he said.

Another initiative includes a plan to revamp Malta’s judicial system, suggesting the creation of a “fit-for-purpose justice system” that enables quick, fair and legally-binding resolutions for disputes, regulatory infractions and matters of non-compliance.

At a time of heightened security and anti-money laundering regulations, the strategy says it is essential for Malta to facilitate due diligence processes through a consistent and foolproof identity system. it would capture shareable data and be a single point of reference to be shared by entities doing business in Malta.

The strategy document calls for the creation of a portal that would constitute the backbone of identity verification and related due diligence processes for the jurisdiction. The ultimate benefit will be for Malta to fully streamline the due diligence processes of any person or entity dealing with Malta thereby facilitating both initial screening and continued monitoring, a competitive advantage over other jurisdictions.