The government has announced incentives to encourage employers and employees to invest in voluntary private pensions.

Finance Minister Edward Scicluna said the government wanted to promote private pensions because people were living longer.

He said employers were being encouraged to buy private pensions for their workers as a means to motive and retain their employees.

He stressed this is a voluntary scheme. “When the time comes for second pillar (obligatory) schemes, the time would have come,” the minister said. But the labour participation rate was still far too low at present and one should not put undue pressures on the labour sector, he said.  It would be time to think of such a (second pillar) scheme when the participation rate was about 72 per cent.

The minister observed that employers already benefit from expense account tax cuts, but the new incentives would go further.

Employers will now get a maximum tax credit of €150 for every €1,000 pension product bought for their employees. If the outlay is less, the credit would be 15 per cent.

Employees who participate in the purchase of such products would not be considered as getting a new fringe benefit (which is taxed) and they would be tax exempt up to €150.

The incentives also applies to self-employed persons who set aside some of their money for a private pension.