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Pension Managers look to Europe and Global Markets

Malta’s pensions industry is realigning itself to service the global pension needs of international corporations while looking to provide pension products to European clients.

The rapid growth of Malta’s international pension management industry has seen the sector flourish and become a key segment of the country’s finance centre. Despite the positive momentum, the sector is however facing a somewhat uncertain future. The industry offers solutions for high-net-worth individuals looking for an investment vehicle, international workers planning for retirement and global corporations seeking pension schemes for their staff. The industry has long catered mainly to the UK market, but is now looking to diversify given the vulnerability of this segment due to Brexit. Meanwhile, the Malta Financial Services Authority (MFSA) has made significant changes to the Maltese pension regulations to strengthen consumer protection by placing greater requirements on pension managers and investment advisers. 

 

A Growing Opportunity 

Malta emerged as a veritable pension hub on the back of changes to UK pension law in 2006, which allowed UK corporate executives and expat pensioners to transfer their pensions to another country, under the UK’s Qualifying Recognised Overseas Pension Schemes (QROPS). Malta licensed its first six pension schemes in 2010. By the end of 2018, the island was home to 58 schemes with €5.35 billion in assets under management. It is estimated that today there are over 30,000 members in Malta-based pension funds. Malta’s retirement practitioners report that the demand for pension transfers from the UK is easing, driven by changes in UK legislation as well as fears and uncertainty over the impact of Brexit on QROPS. However, the industry believes that this business can be replaced by providing cross-border pensions and EU-wide pension plans. Mobile workers across the European Union are said to account for 5% to 10% of the Union’s workforce, and the island sees an opportunity to cater for the pension needs of companies and individuals from EU and global markets. Malta is well placed to take advantage of the further evolution of the market for personal pensions, being a full EU member with a network of some 70 international double tax agreements. 

 

New Regulations 

New rules, which came into effect in July 2019, now mean that pension providers need to hold or obtain a MiFID licence, which, according to industry practitioners, has significantly improved the sector. However, the additional obligations have also seen a number of players withdraw from the market. As the industry goes ever more global in its reach, the Maltese regulator has sought to put consumer protection at the forefront. Retirement Scheme Administrators are also required to ensure that investments are in line with a retail client’s risk profile, while they must disclose all costs, including any upfront, ongoing or exit charges. 30,000 Estimated number of members of Malta-based pension funds. 

  

Future Outlook

The outlook for Malta’s international pensions industry remains positive. With increased global mobility, the need for expat pensions and pension solutions for international companies is increasing. Although EU regulations have been in place to facilitate the set-up of pan-European pension plans, the marketplace has not really provided for cross-border pensions, despite demand from multinationals and individuals. However, barriers related to pensions for mobile workers are gradually being lifted. By the time market momentum grows, Malta will have had enough time to perfect its service offerings and build up a robust track record, placing it in prime position to serve the pension requirements of the wider market, which in turn will help reduce the global retirement savings gap.

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