Malta’s pension system owes much of its current stability to inward migration, yet a strategic review warns demographic trends and housing vulnerabilities could strain the system.
The findings come from the 2025 Strategic Review on the Adequacy, Sustainability, and Solidarity of Malta’s Pension System.
Mandated by the Social Security Act, the review every five years examines whether pensions remain financially viable, socially equitable, and sufficient to provide retirees with a decent standard of living.
87% increase in contributors
The report emphasizes the crucial role of foreign workers in maintaining Malta’s pay-as-you-go pension system. With a fertility rate of just 1.06 and an aging local workforce, the country relies heavily on inward migration to balance contributions and pay outs.
Between 2008 and 2023, social security contributors grew from 151,000 to 283,000, an 87% surge largely driven by migrant workers. In 2023, Maltese nationals accounted for 166,420 contributors, while foreign nationals—particularly third-country migrants—hit record levels, reflecting the system’s dependence on migration to maintain fiscal equilibrium. The review stresses that migration policy and labour participation remain central to pension sustainability, as foreign workers now constitute a growing share of contributors and play a vital role in keeping the system in balance.
A short-term advantage
High turnover among foreign workers, often seen as a labour market challenge due to skills shortages, paradoxically strengthens fiscal sustainability.
Roughly half of all migrant contributors leave Malta within two years, and most never meet the 10-year contribution threshold required to qualify for a pro-rata contributory pension. Of nearly 245,000 foreign contributors between 2008 and 2023, only 5,736—or 2.3%—earned pension entitlements. This dynamic allows the state to collect contributions without creating long-term expenditure obligations, providing immediate revenue with minimal future liabilities.
The report notes conventional international models, including Eurostat projections, often overstate Malta’s pension burden by assuming migrants will remain and retire locally. In practice, the high turnover prevents the surge in public pension spending that was once forecast to grow nearly four times faster than the EU average by 2050.
Despite this short-term advantage, structural vulnerabilities remain. Foreign workers generally have lower contribution densities than Maltese nationals, averaging 22.7 weeks per year compared with 37.3, leaving the system sensitive to fluctuations in migration flows. As Malta’s population ages and the working-age share declines—from 63% today to a projected 51% by 2070—the report warns that migration alone will not suffice to sustain pensions over the long term.
Renters among most vulnerable
By 2024, a single pensioner’s expenses for an augmented basket of goods—including leisure activities and private car ownership—averaged €11,439 annually. While two-thirds of pension recipients surpass this threshold, minimum pensioners often rely on supplementary benefits such as the Senior Citizen Grant or Supplementary Allowance to cover essential expenses. When these benefits are factored in, most households have kept pace with rising living costs since 2020.
However, housing costs have emerged as a critical factor affecting pension adequacy. Pensioners paying unsubsidised market rents are identified as the most financially vulnerable, with the report noting that “only among pensioner households that pay rent does the ratio [of households able to cover key expenses] remain below 80%.”
The review highlights a methodological gap in measuring “decent living,” pointing to the General Workers’ Union’s National Living Income study, which produces significantly higher estimates than other models because it incorporates private market rents rather than assuming subsidised housing. To address this gap, the review suggests potentially streamlining multiple benefits into a single basic, guaranteed income for vulnerable households. Elderly households that do not own their residence, especially those with low financial assets, are a category of particular interest. Streamlined benefits could also be paid more frequently, providing steadier income flows and reducing vulnerability to unexpected expenses.
Second pillar auto enrolment
To strengthen both adequacy and sustainability, the review recommends a set of reforms. Diversifying retirement income through private pension auto-enrolment could reduce long-term pressure on the state system. This includes an auto-enrolment private pension system where employers provide pension plans but employees retain the choice to decline.
The report also advocates revising child-rearing credits to protect parents, particularly women with disabled children, from losing entitlements. Linking the Guaranteed National Minimum Pension to poverty thresholds is suggested to prevent old-age destitution, and continued investment in the ĠEMMA financial literacy programme would equip citizens to plan for decades-long retirements.
The review proposes a uniform adjustment mechanism linking annual increases in pensions to 70% wage growth and 30% inflation, ensuring pension values rise in line with economic prosperity rather than solely with price increases. A gradual adjustment of widows’ pensions until they reach full parity with the deceased spouse’s entitlement is also recommended.
Contribution requirements
The review examines long-term workforce challenges, noting the increase in the required contributions for a full contributory pension—from 41 to 42 years for those born between 1969 and 1975—already introduced in 2024.
The review proposes a public consultation on this change to assess whether the 42-year requirement remains fair and achievable for the modern workforce. Importantly, the review excludes any mandatory increase in social security contribution rates, aligning with the current administration’s electoral mandate, and instead advocates supplementary private savings through auto-enrolment rather than a compulsory second pillar for all workers and employers.
Prepared by the Pension Strategy Group (PSG)—a team of senior officials and technical experts chaired by permanent secretary Mark Musù—the report was issued for public consultation and provides a detailed assessment of Malta’s current and projected pension landscape.
The PSG includes senior Central Bank economists and other technical specialists tasked with analysing system performance and recommending reforms.
The public is being invited to provide feedback on the report by 3 April 2026.