The Times recently reported the European Commission instituted legal proceedings against Malta on the issue of the deduction of pensions in cases where people receive a second pension. The matter was raised by a Maltese pensioner who submitted a complaint to the European Parliament’s Petitions Committee, of which I am a member. The petitioner claimed he receives a UK pension after having worked there for 11 years but that this is deducted from the amount of his Maltese pension.
This practice goes back to an unjust decision taken by the Mintoff government, which has since been perpetuated by successive governments. However, the present Administration has sought to address this anomaly by reducing the amount deducted with specific amounts on a gradual basis.
The issue here is whether this practice is illegal under EU law.
Several readers approached me to check whether their particular situation is covered by the infringement procedure instituted by the Commission.
Let me start by saying this is a very complex issue and I would urge caution before rushing to the conclusion that thousands of people will benefit from this development.
The situation of different individuals may be different and a lot depends on, for instance, whether the pension deducted was a contributory pension to which the beneficiary gave his own share or even whether the pension was acquired for employment in Malta or in another EU country. There are many variables and two seemingly similar cases may well be different.
So expectations should not be raised unnecessarily.
In this particular case, the complainant lived and worked in the UK for 11 years, between 1965 and 1975.
He used to work with the British civil service and, in that capacity, he became entitled to an occupational pension. The Commission looked at his complaint from two aspects.
The first is the EU law on the coordination of social security systems among EU countries. Basically, this law seeks to ensure that if a person worked and paid social security contributions in one EU country but then retired in another he should receive his pension entitlements in the second country in full without any reduction, modification or suspension.
However, this law normally applies to social security schemes to which one has contributed and not to supplementary schemes that are non-contributory in nature. In this particular case, the Commission found that the complainant’s pension was an occupational pension paid by the UK civil service rather than a state retirement pension to which he had contributed. As such, therefore, EU law on the coordination of social security may not necessarily apply.
The second aspect relates to freedom of movement. Since he had moved to another EU country, the issue of freedom of movement comes into play.
The Commission approached the Maltese authorities and confirmed that Maltese law does indeed provide for the deduction of service pensions from national Maltese social security pensions.
The Commission seems to argue that, even though EU law on the social security coordination may not necessarily apply, there is still the principle of freedom of movement under article 39 of the Treaty, which protects the interests of individuals who exercise or have exercised their right to work in another country.
The Commission considers the Maltese law that allows the deduction of the pension is not in conformity with the Treaty because such a practice constitutes an obstacle to the free movement of workers to the extent that it relates to the overlapping of benefits of the same kind.
It is on this basis that the Commission opened an infringement procedure against Malta.
It must be stressed that this case is still in progress and, therefore, one cannot conclude the matter will end up in Court. Still less that the situation is definitely illegal or that pension deductions will definitely be reimbursed.
However, the fact that the Commission, following a long investigation, reached this conclusion puts the issue in a new light.
This leaves just one question, namely whether all the people whose pensions are deducted may benefit from this case. This may not necessarily be the case because not everyone is in the same situation as that of this particular complainant.
As we have seen, this case concerns a person who exercised his freedom of movement and worked in another EU country for a number of years. This implies that those people whose pensions are subject to deductions but who have not exercised their freedom of movement may not necessarily be able to rely on the principle of freedom of movement.
The case continues and one would be well advised to await its conclusion.
www.simonbusuttil.eu
Dr Busuttil is a Nationalist member of the European Parliament.