Innovative pension scheme hits the market

Old woman

MAPFRE MSV Life p.l.c launched the first insurance based voluntary occupational pension scheme in the market. The MAPFRE MSV Life WorkSave Pension Scheme bases itself on the long-term commitment which can be administered by the employer through the working life of the employee.

David Curmi, Chief Executive Officer of MAPFRE MSV Life said, “Through the launch of the MAPFRE MSV Life WorkSave Pension Scheme, we are positioning ourselves once again as one of the key players within a multi-pillar system that seeks to ensure the sustainability and adequacy of retirement provision in our country”.

CEO David Curmi

Long term quality

Mr Curmi explained that occupational pension schemes are long-term commitments. “When an employer decides to arrange a voluntary occupational pension scheme for its employees, an important consideration is the selection of a provider that has the financial, operational and technical capacity to deliver long-term quality service and support. At MAPFRE MSV Life, being part of the MAPFRE Group, we are well-positioned to effectively support employers and their employees by setting up their WorkSave Pension Scheme and administering such a scheme throughout their working life and into retirement. I consider this to be one of our key strengths in this business,” added Mr Curmi.

There are a number of tax benefits available to both the employer and the employees, which make the MAPFRE MSV Life WorkSave Pension Scheme an attractive tax-efficient proposition.

Tax-efficient

The employer can benefit from a tax credit of 25% of every contribution paid on behalf of an employee, subject to a maximum tax credit of €500 per employee per annum. Furthermore, contributions paid by the employer on behalf of an employee are tax-deductible up to €2,000 per annum.

Employees also stand to benefit from a tax credit of 25% of every contribution that the employee pays into a workplace pension, subject to a maximum tax credit of €500 per employee each year. This is in addition to tax credits that the employee receives under any personal pension plans that the employee might have. Furthermore, no capital gains tax is applicable to the investment income whilst the retirement savings accumulate. Employer contributions towards the employee’s retirement account under the WorkSave Pension Scheme are not subject to Fringe Benefits Tax. 

Saving well

Talking about the importance of saving well, saving enough and saving wisely, Mr Curmi said, “Future pension adequacy depends not only on how much people save and for how long. Investing in a diversified range of assets can be as important as saving enough and has a very important role in delivering adequate retirement income. It is vital that pension savers have the option to invest in a well-diversified mix of the major asset classes”.

The MAPFRE MSV Life WorkSave Pension Scheme offers a wide range of default and non-default investment options that invest in a broad range of asset classes, for employers and their employees to choose to invest in. “All our investment options consist of investment funds or investment strategies provided by some of the leading global asset management companies including Fidelity International, BlackRock and Invesco and local asset managers Bank of Valletta p.l.c. and APS Bank p.l.c.,” said Mr Curmi.

Importance of adequate pensions

The importance of working towards pensions adequacy and sustainability arises from the fact that Europeans are living longer and this is putting increasing pressure on pensions systems at a time when public finances are already under strain. The number of people aged 65 or above relative to those aged 15 to 64 is expected to double by 2060. According to UN Statistics, by 2050, Malta is expected to be the country with the ninth highest life expectancy in the world. Many European states are therefore encouraging their citizens to take personal responsibility and contribute more and for longer periods if they are to have an adequate income in retirement.

In this context, the insurance industry has a major role to play. “As major providers of a wide variety of occupational and personal pensions, insurance companies are a key part of any multi-pillar pensions system. As an effectively regulated and well performing industry, the insurance industry has much to contribute to tackling Europe’s pension challenge. In Malta, we are setting the pace through this important launch which will see us contribute actively towards enabling employers to contribute towards the retirement savings of their employees,” concluded Mr. Curmi.