The June 2025 consultation document on the proposal for an automatic enrolment (AE) Occupational Pension Regime sets out the eligibility rules that will guide the system. Employees are considered eligible if they receive or are entitled to a wage or salary, are between the age of 18 and ten years before retirement, work with an employer on a full-time basis or on a part-time basis where the job is their primary source of income, and are not on probation.
On the surface, these rules are straightforward. They define who will be brought into the new pension framework and offer clarity on scope. But clarity is not the same as fairness, and here the consultation document leaves critical questions unanswered. Eligibility is not a small technicality; it is central to how the reform will be judged. If it is too broad, the system risks imposing burdens on those least able to save. If too narrow, it excludes those who might benefit most.
The explicit inclusion of part-time workers is significant, but the reality of part-time employment in Malta is often unstable. Many workers rely on multiple small jobs, with incomes that swing from month to month. Compulsory contributions in such cases risk fragmented savings, irregular patterns, and frequent opt-outs. Instead of producing steady long-term accumulation, the scheme may create frustration.
Casual and temporary workers are not clearly addressed in the consultation document. Their work is seasonal, short, and episodic. If swept into AE without adaptation, they are likely to build broken pots of little value in retirement. This would add burdens without meaningfully improving security. Clarity on this point is essential to avoid undermining the reform.
Low-income earners are another group the document does not distinguish. For those near the minimum wage, saving through enforced deductions risks immediate hardship. Each euro redirected into a pension could be the difference between meeting or missing essential needs. Without a minimum income threshold, AE may unintentionally penalise the very people it should protect. Voluntary opt-in, not compulsion, is the fairer path.
The consultation document limits enrolment by excluding workers within ten years of retirement, a sensible step given the short saving horizon. Even just outside this limit, late contributions often replace other savings and exploit fiscal incentives rather than build real pension value. The small funds accumulated bring little benefit, while the state may lose more in revenue than it gains. Policy design must prevent this outcome while still allowing voluntary participation.
The real opportunity of AE is in starting workers young. When workers join the system early, they benefit from the most valuable resource: time. Even modest monthly contributions, sustained over decades, build into retirement funds. The power of compounding steadily magnifies them. The earlier contributions begin, the stronger the outcome. What may seem like small deductions at the start of a career can grow into the difference between relying on the state and enjoying a secure, independent retirement. For those aged 18 to 29, early saving also coincides with formative career years, making AE not just a pension tool but a way of embedding positive financial habits. Malta's experience underlines the gap: as of 2022, only around 10 per cent of all members of personal private pension plans were aged 29 or younger, showing that voluntary systems have not reached the younger generation. AE offers the chance to reverse this trend.
Experience from other reforms confirms this. When AE was introduced in the UK and New Zealand, the most striking results were among younger workers. More than 80 per cent of those aged 18 to 29 who were automatically enrolled stayed in the system and continued to save. Defaults shifted behaviour: what had once relied on personal choice became a steady habit. The lesson is clear and encouraging. If the goal is to build real, long-term pension value, policy should focus on younger workers, giving them the chance to save early and let compounding work to their advantage. For Malta, this is where AE can deliver its greatest return: strengthening retirement outcomes, closing the participation gap among the young, and reducing future reliance on the state pension system.
Eligibility must also reflect income. A clear threshold should decide who is enrolled automatically and who may opt in, protecting those least able to save and keeping contributions fair. How this threshold is set will be explored in a forthcoming article. AE, if designed carefully, can build trust, encourage saving, and strengthen retirement security for generations.
David Spiteri Gingell was Chair, Pension Reform Commission (2004-2012) and Member, Pension Strategy Group (2013-2021)