Malta has until the end of January to respond to European Commission claims that deductions of contributory service pensions of former British servicemen are illegal.
Sources close to the Finance Ministry said Malta was taken by surprise by the infringement procedure started by Brussels at the end of last month, which might have serious consequences on government finances.
Officially, the government is still digesting the legal arguments brought forward by the Commission.
The government confirmed it had received a letter of formal notice – the first stage of the three-pronged legal process – a few weeks ago. “Malta will be analysing the arguments brought forward by the Commission and will be replying within the stipulated timeframes,” a government spokesman said.
Informally, government sour-ces expressed concern over the issue. If the Commission’s arguments are upheld, the infringement could cost Malta mill-ions of euros in refunds to about 6,000 former British servicemen who have seen their UK pension deducted over the years from the normal national insurance pension they qualified for.
Although the issue dates back to 1979, when a Labour government imposed a ceiling so former British workers would not be entitled to two different pensions, its supposed illegality only surfaced a few weeks ago.
The Commission decided to issue an infringement notice against Malta following a four-year investigation on the basis of a petition presented by Joseph Caruana, a former British serviceman in 2006.
Brussels concluded that the Maltese legislation in question did not conform to EU rules, in particular with regard to the rules on overlapping of benefits of the same kind, such as two old age pensions.
Mr Caruana, a Maltese citizen who receives a British pension for his work in the UK between 1967 and 1975 complained to the European Parliament’s Petitions Committee his service pension had been deducted illegally from the amount he would have been entitled to after retirement in Malta.
Recognising the anomaly, the government had started taking measures to adjust the pension system of former British servicemen. However, according to the Commission, this was not enough as the service pensions, which were contributory, should have never been deducted in the first place.