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Government plans to introduce three pension schemes over the coming years and to raise the retirement age to 65, according to the Pensions White Paper published yesterday.
Presented in conjunction with the Budget speech in Parliament yesterday evening, the ‘Pensions – Adequate and Sustainable’ document proposes dividing the pension system into three pillars - two of which are mandatory while the third is to remain voluntary.
The White Paper proposes raising retirement age gradually, for men and women alike, to 65.
The first pillar, which is considered as a safety net aimed at guaranteeing a minimum pension, will consist of a two-thirds pension accumulated over 40 years, instead of the current 30. Also, instead of calculating one’s pension from the basis of the wage of the best three years of the last decade worked, pensioners will receive an average based on contributions paid over the last 40 years.
The second pillar, which will also be mandatory for the employed and the self-employed, is being described as a means of increasing one’s pension income.
Both proposals are to allow individuals to continue working beyond the 65-year retirement age while enjoying the two-thirds first pillar and second pillar pensions with no capping on income earned, subject to the payment of the first pillar contribution.
The third pillar pensions scheme, meanwhile, will be a voluntary fund that complements one’s pension income. The annual contribution to the third pillar should be non-taxable up to a capped limit.
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