Sunday, 19 April 2026, 08:00
Last update: about 12 days ago
The numbers are not comfortable. The old-age dependency ratio stands at 26.6% overall – but among Maltese nationals it was already 41.8 in 2023, and has risen every year since 2012. The foreign workforce suppresses the headline figure. Remove it, and the demographic is under serious pressure.
The trajectory matters more than the snapshot. That ratio is projected to rise from 27.1% in 2022 to 65.4% by 2070 – more than doubling in under 50 years. The trajectory matters more than the snapshot. That ratio is projected to more than double by 2070. Fertility stands at 1.01 – the lowest in the EU, against a replacement rate of 2.1.
Pension expenditure is projected to rise from 7.1% of GDP to 10.9% by 2070 – one of the highest increases in the EU. The direction of travel is unchanged. Migration has bought time. It has not bought a solution.
Malta introduced an actuarial deferral scheme in 2016, rewarding workers who remain employed beyond the early pension access age of 61. Those who defer to 65 receive a 29% uplift in pension entitlement. The scheme works because it is voluntary and prices the choice correctly. Research by the Central Bank quantifies the fiscal gain from pension reforms enacted since 2007 at €228 million by 2026 – €98 million in pension expenditure savings, the remainder in tax revenue from longer careers. Today, barely 14 per cent of eligible individuals retire at 61. That same actuarial logic should now be extended to the 66-70 age band.
The statutory pension age reaches 65 for those born from 1962 onwards. At 65, the incentive framework stops. A worker who wishes to continue receives no actuarial reward for the additional contribution period. That is a design gap – and a fiscal opportunity. I propose extending the voluntary deferral scheme beyond 65, with a defined percentage uplift for each year worked between 66 and 70. The rate should not be actuarially neutral. The case for setting it generously is empirical, not political.
The 61-65 scheme is the evidence: it works precisely because it pays above the actuarially neutral rate, and was made more generous in the 2023 Budget to amplify the labour market effect. The pre-2023 scheme, set closer to neutral, produced a more limited impact. That relationship – between the generosity of the rate and the behavioural response – is the design principle that should govern the 66-70 band.
The extension follows the same incremental design. Each year of continued employment from 66 adds one tranche – two tranches at 67, five at 70. The exit point is the worker’s choice. I propose a rate of 10 per cent per additional year. A worker who continues to 70 would therefore access a pension 50 per cent above their pension at 65, which may itself already carry the uplift from the 61-65 deferral scheme.
The two entitlements are sequential: the 66-70 top-up is applied to the pension as it stands at 65, not to the original base. A worker who deferred from 61 and continues to 70 receives the product of both schemes – each rewarding the same decision to remain in productive employment. The fiscal arithmetic holds: every year of deferred drawdown reduces pension liability while generating continued social security contributions and income tax.
An actuarial top-up only works if workers are permitted to remain employed. Employer-imposed mandatory retirement, still widely practised in Malta, directly undermines any extended-working policy. Other countries have abolished it entirely or raised the permissible threshold substantially. Where law and norm permit continued work, behaviour follows. Malta should legislate to remove mandatory retirement ages, with defined exceptions for roles where age is a genuine operational or safety constraint. The framing matters: this is not an obligation to work longer. It is the removal of an arbitrary constraint on those who can and choose to do so.
Worker incentives and a permissive legal framework are necessary. They are not sufficient. Employers must also be equipped – and motivated – to retain, retrain, and redeploy workers past 65. Across the EU, only 35 per cent of workers aged 55-64 participated in education and training in the past twelve months, against nearly 50 per cent of those aged 35-44 – a gap of fifteen percentage points. That gap is not a training statistic. It is a productivity loss. Skills become obsolete. Experienced workers exit early. Firms lose institutional knowledge that they cannot quickly replace.
Other countries have addressed this through wage offset schemes, training cost co-funding, and one-off operational grants to help employers restructure roles and hours. Government absorbs a share of the cost, aligns private incentive with public interest, and avoids the blunter alternative of mandatory age extension.
I propose a three-part employer support package for workers aged 65-70. First, a Malta Senior Worker Tax Credit – a refundable tax credit of 20% of wages paid to workers aged 65 and over who have opted to defer their pension, capped at a defined monthly salary ceiling. Second, a Reskilling Grant – co-funded by government and employer, covering accredited training costs for this age band, administered through JobsPlus and targeted at digital, technical, and sector-specific upskilling. Third, a Flexible Roles Fund – a one-off operational grant to help employers restructure hours, responsibilities, or working conditions to retain workers past 65. None of this requires new bureaucratic architecture. Malta Enterprise’s existing incentive framework and JobsPlus’s operational infrastructure can host these instruments.
I do not propose a raise in the retirement age. The statutory pension age remains 65. The scheme is voluntary throughout. Nobody is compelled to work longer. The right to retire at 65 is unchanged.
Malta has demonstrated that actuarially designed deferral incentives shift behaviour at modest fiscal cost. The 61-65 scheme is the evidence. Extending the same logic to 66-70, removing the legal barrier of mandatory retirement, and backing employers with targeted tax credits and training grants completes the policy architecture. The demographic pressure is not a projection to be debated. It is a trajectory already in motion. The tools are proven. The question is whether the political will exists to act before the arithmetic chooses us.
David Spiteri Gingell is a Governance, Institutional, and Digital Transformation Consultant
