Updated | European Commission opens infringement proceedings over pensions

Adds reaction by Government

The European Commission has requested Malta to stop reducing Maltese old-age pensions by the amount of civil servant pensions received from other member states.

Maltese legislation provides that Maltese statutory old-age pensions are partly decreased by the sum of service pensions paid for past services in Malta or abroad. The European Commission said this practice breaches the EU's social security coordination rules, because all pensions based on national legislation, such as civil service pensions, fall under the protection of the EU rules on social security coordination.

This prohibits the application of national rules on suspension and reduction of benefits to a pension calculated under social security coordination rules.

The Commission has sent Malta a 'reasoned opinion' under EU infringement procedures. Malta now has two months to inform the Commission of measures it has taken to bring its legislation into line with EU law. Otherwise, the Commission may decide to refer Malta to the EU's Court of Justice.

Under EU social security coordination rule, EU citizens have the same rights and obligations as nationals of the country where they are covered. All pensions based on national legislation, such as civil service pensions, fall under the protection of these rules.

In a reaction, the Maltese government maintained that it is correctly applying the articles with respect to all pensions paid by any EU Member State and which fall within the scope of the mentioned Regulations.

It also added that Malta will be analysing in depth the Reasoned Opinion issued by the European Commission and will present its views again to the Commission in due course.

"In Malta's opinion, there is no breach of Community law," the Office of the Prime Minister said in a statement.

Government said the Maltese situation could not be compared to any of the situations previously considered by the European Court of Justice where the general principle of the freedom of movement of workers was elaborated.

"In the case of Malta, especially the category of Maltese pensioners in receipt of a UK service pension who never resided or worked in the UK, there is neither an element of movement from one country to another - since these employees never left Malta and never contributed towards the UK social security scheme - nor is there a situation which is specifically and expressly provided for in the Regulations at issue," it said.

Government added this legal couldn't be uprooted from "its very specific sphere of application and blindly applied to the Maltese situation which is of a totally different nature".

Government added that while the Commission assumed that there is a clear trans-boundary element in Malta's case. "However, it is clear that Article 2 of Regulation (EEC) 1408/71 and/or Regulation (EC) 883/2004 was never intended by the EU legislator to regulate the sui generis historical and constitutional context of Malta under British rule between the 19th and mid-20th century," government said.

"Moreover, Article 7(2)(c) of Regulation (EEC) 1408/71 and Article 8(1) of Regulation (EC) 883/2004 provide that certain provisions of social security conventions entered into by Member States before the date of application of these Regulations shall continue to apply and will not be affected by the Regulations if, amongst others, they arise from specific historical circumstances."

Government also reacted to the obligation of member states to consider the real nature of benefits in another member state, even though that member states does not classify it as falling within the scope of regulations.

"Since Regulation (EEC) 1408/71 and Regulation (EC) 883/2004 establish "a system of coordination" of Member States' social security systems, and since the UK does not consider these specific service pensions to fall within the scope of these Regulations, Malta cannot be obliged to disregard the UK's declaration and classification of its own pensions," the OPM said.

"Nevertheless, the Commission expects Malta to apply the Regulation contrary to the classification given by the UK to its own service pensions. Were Malta - or any other Member State - to do this, the whole system of social security coordination between the EU member state would be seriously jeopardised since all states would be able to pick and choose at will which declarations under Articles 5 and 9 of the respective Regulations to respect, leading to an incoherent and un-coordinated application of the Regulations."

Government added that the Commission has the obligation to ensure that all declarations are in line with the spirit of the Regulations, in such a way that Member States can then effectively coordinate their social security systems on the basis of such declarations, as required by EU law.

The Commission also argued that Malta's situation couldn't be exempt from Regulation (EEC) 1408/71 and/or Regulation (EC) 883/2004 because Malta did not make an entry in Annex IX, Part D of Reg 1408/71 or in Annex IX of Reg 883/2004. "However, it is clear that Malta could not have made such an entry due to the fact that such entries only apply to a type of pensions the amount of which is not dependent on the length of an insurance or employment period. In fact, the Maltese social security pensions are of a different type of pensions because their amount is dependent on the length of an insurance or employment period," the OPM said.