There are three types of pension in Luxembourg – a public state pension, a company pension, and a personal pension. The Caisse Nationale d’Assurance Pension (CNAP) manages the public state pension.
If you are a foreign resident who has paid into a state pension in one or more EU countries, it is possible to combine your state pensions. For those from outside the EU this may also be possible if there is a bilateral agreement with your country of nationality.
Public state pension - If you pay social security contributions on a monthly basis, then some of these contributions (8% from you, and a further 8% each from your employer and the state) will be put towards your state pension. Earnings subject to contributions cannot exceed five times the minimum social wage. What you get will depend on the number of years you have made contributions before you reach the age of 65 years (the official national retirement age in Luxembourg).
Who can claim a Luxembourg state pension? - Anyone who has contributed social security towards their pension for 10 years or 120 months is entitled to a pension. A full pension is only possible if you have contributed for 40 years (or 480 months).
If you contributed for less than 120 months or your contributions were very low (self-employed independents on incomes lower than the social minimum wage for example), you can apply to have your social security contributions re-imbursed, or combined with contributions to state pensions made in another EU country or one with which Luxembourg has a bilateral agreement. You can also include periods you were not able to contribute, such as the years you studied from the ages of 18 to 27 or where you took time off for childcare, or injury through work. This includes sickness, time on unemployment benefit, apprenticeships, charity work, and certain sporting activities.
Company pension - You and your employer may also pay into a company pension, where your contributions will be tax free. These pensions can usually be claimed between the ages of 60 to 65 years, and pension plans often include death in service benefits.
There are three types of pension fund for company pensions in Luxembourg:
- SEPCAV or Pensions Savings Company with Variable Capital is similar in structure to an investment trust. It requires a minimum capital of €1 million within the first two years of set up. Members are shareholders and own a set number of shares, and benefits are paid as a single lump sum.
- ASSEPs or Pension Savings Associations, usually non-profit making. They can be used as defined benefit or defined contribution schemes or a hybrid. Benefits can be paid as a lump sum or annuity or a mix of both. Both SEPCAV and ASSEP vehicles are supervised by the CSSF or Commission de Surveillance du Secteur Financier which regulates the banking and investment industry in Luxembourg, and there are no restrictions regarding investment regulations.
- ASBL – these tend to be set up by larger companies wishing to establish their own pension fund. The sponsoring company is required to guarantee the solvability and liquidity of the pension fund at any given time. Asbls are supervised by the CAA or Commissariat aux Assurances, the Luxembourg insurance regulator. Schemes can be defined benefit or defined contribution.
Personal pension - This is essentially either a savings or investment account with a bank, and you cannot access the money until you retire. Your employer and the government do not contribute.
On retirement you can take up to 50% in a lump sum and the rest in monthly payments. Lump sum payments from personal pensions are considered extraordinary income and are taxable at half the normal rate you pay.
Since 2016, you can claim a reduction in your taxable income for pension contributions of up to €3200, regardless of age. However the scheme you take must be for a minimum of 10 years and must mature when you are aged between 60-75 years old.
The aim of 2025 pension reform is to formulate recommendations that will serve as a basis for future policy decisions.
The working meetings of the expert groups are thus aimed at developing realistic proposals and recommendations to ensure the sustainability and equity of the Luxembourg pension system, thereby providing a solid basis for possible reform measures by the summer of 2025.
The consultation process will culminate in a final presentation and publication of a summary report scheduled for the end of May 2025.