Deducting contributory pensions from former British servicemen’s entitlement to the general national insurance pension has been declared illegal by Brussels, which has started infringement procedures against Malta.
Following a four-year investigation, the European Commission has concluded that the practice used by the Maltese government since 1979 is unlawful, The Times has learnt.
In practice, this means servicemen have been suffering payment cuts illegally since 1979 and Malta could now be obliged to refund millions of euros in arrears to over 6,000 men who served with the British, at least since Malta joined the EU in 2004.
Relatives of deceased services pension holders, who have suffered this injustice, could also become entitled for compensation.
The Commission reached its conclusion after a petition was submitted to the European Parliament’s Petitions Committee in 2006 by Joseph Caruana, a Maltese citizen who receives a UK pension as a result of his work there between 1967 and 1975.
He complained his British service pension had been deducted illegally from the amount he was entitled to as a pension after retirement in Malta.
His complaint, relayed by Nationalist MEP Simon Busuttil, was upheld by Brussels, which concluded Maltese law infringed EU rules.
An official said the Commission had already started legal action against the Maltese authorities over this and was expecting further developments in the coming months.
“We hope the Maltese government changes the law and rectifies this anomaly so the issue will not be taken to the European Court of Justice,” the official said.
After having assessed the issue in detail on the basis of information provided by the Maltese and British authorities, the Commission “considered that the Maltese legislation in question is not in conformity with Regulation 1408/71, in particular with regard to the rules on overlapping of benefits of the same kind, such as two old age pensions”.
The Maltese authorities confirmed that the Social Security Act provided for the deduction of service pensions from national social security pensions. This, according to the Commission, was found to be illegal and not in conformity with EU rules.
Although infringement procedures have so far never been mentioned publicly, both in Malta and in Brussels, the government seems to recognise this injustice and took action over the past years to start addressing the anomaly.
In the last Budget, the government announced it would be dedicating €1.3 million in 2011 to make a further adjustment to the social security system so that the pension capping for ex-British servicemen be altered and they could receive an extra €200 a year. This was the third capping adjustment introduced by the government – in 2008 and in 2009 the threshold ceiling for ex-British servicemen was increased by €665.87.
However, this might still not be enough as the Commission is now saying all deductions are illegal.
The service pension came around when a number of workers were given the option to invest in a second tier pension scheme by the British civil service. However, when the time came for them to retire, their national insurance pension was cut by the whole amount of the service pension because of a ceiling imposed by the Labour government in 1979.