Tax benefits for private pension holders will only be introduced after a decision is taken on mandatory work-related private pension schemes, according to Finance Minister Tonio Fenech.

“It is unfair to encourage people to invest in a private pension and then force them to pay another premium for a mandatory work-related pension scheme,” Mr Fenech said yesterday.

He was reacting to criticism by the government’s own pension reform working group that said it could not understand why tax benefits were not introduced years ago.

Voluntary private pensions are the third pillar of the reform started eight years ago and the least controversial.

But Mr Fenech said the government had technical advice from the financial services regulator not to move on to private pensions before a decision was made on a mandatory work-related scheme (second pillar) to which both workers and employers would contribute.

“Introducing third pillar pensions now would effectively mean that we are closing the door to second pillar pensions but, at some point, the country has to decide whether it will introduce mandatory work-related pensions.”

If the reform is implemented fully, people would be paying national insurance for their government pension and a premium for their work-related pension scheme. Those who also opt for a private pension would have to fork out a third premium.

The pensions working group said the second and third pillars were important because they would ensure an adequate income for pensioners in the future.

However, businesses warned that a second pillar pension would increase costs and make the country uncompetitive.

Eight years ago the government raised the retirement age to 65 and the ceiling for its first pillar pension.

But pressure is mounting to carry on with the reform.

This week, the European Commission warned that Malta faced serious problems if it did not address pension reform.