On August 5, the government published the Retirement Pensions Act. Set to become Chapter 514 of the Laws of Malta, the Act is earmarked to replace the Special Funds (Regulation) Act of 2002 (SFA) and aims to enhance regulation of Maltese retirement schemes, retirement funds and the related service providers.
The Act officially widens the scope of retirement pension regulation- Matthew Brincat
There is no doubt that the new Act was published at the right time for Malta. The state pension provision is increasingly under pressure to provide adequate pensions for retirees. There is ongoing talk about the need to introduce and encourage ‘second pillar’ occupational retirement schemes as a supplement to the state pension provision.
The Malta Financial Services Authority is currently gaining experience in the authorisation and supervision of ‘third pillar’ or personal pension schemes. These are currently being registered with the MFSA to cater for those persons (including non-Maltese residents) who wish to enter into private pension arrangements with approved retirement scheme administrators of their choice.
The RPA, which has been approved by Parliament but is not yet in force (with the exception of article 57), introduces new concepts and makes a number of changes to the SFA. Although these do not alter the fundamentals of current legislation, pension administrators, trustees and wealth planning specialists should still be aware of the contents of the new rules.
The new Act looks into the future of pensions in Malta. Firstly, the Act officially widens the scope of retirement pension regulation. Whereas previously, the SFA did not explicitly cater for personal pension schemes but only for occupational or ‘second pillar’ retirement schemes, the RPA makes a clear distinction between the regulation of occupational and personal pension schemes. This is a much needed amendment since, in practice, only personal pension schemes have currently been registered with the MFSA.
Current pension administrators already engaged in the nascent retirement industry should know that the RPA will regulate retirement scheme administrators, custodians, trustees and investment managers, collectively referred to as ‘service providers’, who operate in or from within Malta with the purpose of providing services to a retirement scheme or retirement fund.
In addition, the RPA will require any person who provides back-office administrative services to any retirement scheme or service providers, in or from within Malta, to be formally recognised by the MFSA in order to provide such services.
From a regulatory perspective, the RPA gives the MFSA new powers which were not present under the SFA. It creates the framework for new Pensions Rules to be issued (presumably these will replace or amend the current MFSA Directives for Retirement Schemes) and it cleans up the SFA so as to eliminate the replication of rules that applied to retirement scheme and retirement fund administrators, as currently found in the SFA and the MFSA Retirement Directives.
The RPA also has a European dimension. It makes specific references to the Institutions for Occupational Retirement Provision (IORP) Directive (Directive 2003/41/EC) to ensure the complete transposition of the directive regulating the activities and supervision of transnational occupational pensions into Maltese law.
This is most definitely a welcome introduction, since although the passporting regulations issued under the SFA effectively implemented the core aspects of the IORP Directive, the SFA did not include any IORP specific provisions.
Ultimately, the success of Malta based pension schemes and achieving a reliable and low-risk Maltese pension system will not solely depend on this piece of legislation. However, the introduction of the RPA into our legislative framework shows the government’s intention to create a comprehensive regulatory framework which should be the catalyst for a healthy pensions market.
mbrincat@jmganado.com
Dr Brincat is a senior associate within the insurance and pensions practice of Ganado & Associates, Advocates.