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Luxembourg pension: how much the elderly are paid and how to benefit

Whether approaching retirement or planning for the future, gaining insight into the pension system can help ensure a comfortable and secure retirement. This article provides a comprehensive overview of Luxembourg's pension system, benefits available and the steps for obtaining them.

Last time updated
24.06.24

The Luxembourg pension system is known for its relatively high payouts compared to other European countries. As of January 1, 2024, the minimum pension in Luxembourg for 40 years of contributions is an impressive 2.244,82 euros gross per month.

Types of pensions in Luxembourg

Before diving into the details of eligibility requirements and pension calculations, it is important to understand the different types of pensions available in Luxembourg. The local pension system has three main pillars.

State pension plan
Occupational pension plan
Private pension plan
State pension
Occupational pension plans
Private pension plans

Pension scheme in the Grand Duchy of Luxembourg

Now that we have clarified the different types of pensions, let's examine in detail how the pension scheme in Luxembourg works. We will look at the various contribution funds, the Luxembourg pension age, the amount of retirement income, tax implications, and more.

Dual Pension Regimes
Luxembourg's pension system includes a general regime for private sector employees and a special regime for civil servants, municipal employees, and CFL staff.
Comprehensive Coverage
The pension system covers all employed and self-employed individuals, ensuring that a wide range of workers are included in the retirement benefits scheme.
Flexible Retirement Ages
There are three possible minimum retirement ages: 65 (legal retirement age with at least 10 years of contributions), 60 (early retirement with 40 years of contributions), and 57 (early retirement with 40 months of mandatory insurance contributions).
International Contributions
Contributions made in other EU countries or countries with a social security agreement with Luxembourg count towards the pension, providing flexibility for workers with international careers.
Minimum and Maximum Pensions
 The minimum pension ensures at least 90% of the reference amount for 40 years of insurance, while the maximum pension is capped at 5/6 of five times the reference amount.
Adjustments for Inflation
Pensions are periodically adjusted for cost-of-living increases, helping to maintain the purchasing power of retirees in the face of inflation.
Tax and Contributions
Pensions are subject to health insurance contributions (2.8% of the gross pension), dependency insurance contributions (1.4% after deduction), and personal income tax, ensuring that retirees contribute to essential services while receiving their benefits.
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Pension funds in Luxembourg

Generally, there are two different regimes: the general regime, which covers private sector employees, and the special regime, which covers civil servants, municipal employees, and CFL (Luxembourg National Railway Company) employees.

Retirement conditions

Employees and self-employed workers are entitled to a Luxembourg pension as long as they meet the age and recognized contribution years requirements. There are three possible minimum retirement ages.

At 65 years

This is the legal Luxembourg pension age. To retire at this age, one must have contributed to the pension insurance for at least 10 years over their working life. These 10 years of contributions can be made in Luxembourg or in any EU country or other countries that have signed a social security agreement with Luxembourg.

At 60 years

Early retirement is possible if one has contributed 40 years to the pension insurance, including at least 10 years of mandatory insurance periods, continued insurance periods, optional and/or retroactively purchased periods.

At 57 years

Early retirement from this age is possible if the insured person has paid 40 months of contributions to mandatory insurance.

Amount of the Luxembourg pensions

The old-age pension consists of two main components: the flat-rate increases and the proportional increases.

  • Flat-rate allowances are granted based on the duration of insurance, up to a maximum of 40 years. They consider periods of mandatory, continued, optional, or retroactive purchase insurance and complementary periods.
  • Proportional allowances are granted based on the contributable income paid during the insurance career.

Additionally, pension calculations consider adjustments for the cost of living and salary developments in the labor market. There are minimum and maximum pension amounts in place as well.

Generally, the pension cannot be less than 90% of the reference amount if 40 years of insurance periods have been covered. This amount decreases by 1/40 for each year missing between 20 and 39 years. The annual reference amount is set at 2,085 euros based on the 1984 index number 100.

In 2024, the minimum pension corresponds to 2,244.82 euros gross per month in Luxembourg. On the other hand, the maximum pension amount is 5/6 of five times the reference amount, which corresponds to 10,392.67 euros gross per month.

Taxation of pensions

Luxembourg old-age pensions are subject to three main deductions that reduce the retiree's final payout: health insurance, dependency insurance, and income tax.

Health insurance, at 2.8% of the gross pension shared between the retiree and the National Pension Insurance Fund (CNAP), ensures retirees have access to healthcare.

Dependency insurance, a 1.4% deduction implemented in January 2024, goes towards long-term care for retirees needing extra support.

Finally, pensions are taxed like other income based on the retiree's total taxable income. These deductions ensure retirees contribute to essential services while still receiving a significant portion of their retirement benefits.

How to apply for a pension?

Even if you meet all the requirements, a Luxembourg pension is not granted automatically, you must submit an application. Here, we'll cover the key elements of the application process, the timelines to respect, the entities to contact, the necessary documents, and other important details to consider.

When to apply for pension?
Where and how to apply for a pension?
Processing time

Can expats recieve a pension in Luxembourg?

Foreign nationals, regardless of their country of origin, who work or have worked in Luxembourg and meet the Luxembourg pension requirements are eligible to apply for a pension. The documents and procedures are the same as those for Luxembourg nationals.

Foreign nationals who work or have worked in Luxembourg but do not reside there, such as many cross-border workers, have the same pension rights as Luxembourg residents. The only difference, as mentioned in the previous section, is that these individuals must submit their application to the competent authority in their country of residence. The foreign organization will then submit an application on their behalf to the Caisse Nationale d’Assurance Pension (CNAP) to claim their Luxembourg pension rights.

If you receive a pension from any country and the sum of this pension and all your other income exceeds the Luxembourg social inclusion income, you can apply for a residence permit in Luxembourg for private reasons. For more information on this topic, we recommend reading our dedicated guide.

Residence
Luxembourg
Relocation

How to move to Luxembourg for private reasons

Luxembourg pension calculator

Calculating the exact amount of your Luxembourg pension involves lots of variables. The calculation process is complex, encompassing various formulas and multiple stages. Currently, there is no official Luxembourg pension calculator.

It is important to note that due to the complexity of the calculations and the numerous parameters involved, online calculators generally provide only approximate results. Therefore, it is advisable not to rely solely on these tools for an accurate pension estimate.

To obtain a more precise estimate of your Luxembourg pension, consider the following options.

Consult a professional

Engage a professional to assist with the pension calculation. This approach ensures that all relevant variables and personal circumstances are accurately considered.

Research the formulas

If you have the time and inclination, you can delve into the detailed formulas and procedures for pension calculation. This method requires a significant investment of time and effort to fully understand the process.

Request an estimate from CNAP

Individuals aged 55 and over can request a pension estimate from the Caisse Nationale d'Assurance Pension (CNAP). This option provides a more reliable estimate based on your actual contribution history and other relevant factors. For more information on this procedure, visit guichet.lu.

Life and benefits of pensioners in Luxembourg and Europe

In Luxembourg, pensioners enjoy a well-deserved retirement, characterized by various activities and benefits that enhance their quality of life.

Elderly individuals often engage in leisurely activities such as spending time with family and friends, pursuing hobbies, traveling, and enjoying the country's natural beauty through outdoor activities. Many pensioners also participate in community activities, volunteering, and cultural events, fostering social connections and a sense of belonging. While some pensioners may choose to work part-time or engage in volunteer work, the majority typically enjoy their retirement years without the need for employment.

Luxembourg offers various benefits and social security programs to support its pensioner population:

  1. Discounts for services

    Pensioners may be eligible for discounts on cultural events, leisure activities, and healthcare services, helping to reduce living expenses.

  2. Home assistance

    Elderly individuals with specific needs may receive home assistance services, including meal delivery, and home care, enabling them to maintain their independence and live comfortably in their own homes. You can get more information on the dedicated page of guichet.lu.

  3. Mobility assistance

    For those with reduced mobility, Luxembourg offers services such as adapted transportation and mobility aids, helping pensioners stay active and connected with their community.

You can learn more about all the advantages and benefits available to seniors in Luxembourg on the Luxembourg government's dedicated website, and in the guide they have created, which you can download on Luxtoday.

Documents
PDF
Advantages and benefits available to seniors in Luxembourg
FR
Advantages and benefits available to seniors in Luxembourg
Download

Pensions in Europe

We've covered the details of the pension system in Luxembourg, but how do pensions in other European countries compare? To gain insight into this, we can refer to the Mercer CFA Institute Global Pension Index (MCGPI). This index evaluates and ranks the pension systems of various countries worldwide, classifying them into several categories based on their performance.

Grade AThis category is for first-class and robust retirement income systems that deliver good benefits, are sustainable, and have a high level of integrity. In the latest edition, there are 4 countries: the Netherlands, Iceland, Denmark, and Israel.
Grade BThese grades are for systems that have a sound structure with many good features. Here, we find Australia, Finland, and Singapore, aiming to become A-graders. Another 12 countries, the majority of which are European, are Norway, Sweden, the United Kingdom, Switzerland, Canada, Chile, Uruguay, Belgium, New Zealand, Portugal, and Germany.

With relatively high retirement benefits, Luxembourg offers a reliable and secure pension for its aging population. Although navigating the pension landscape in Luxembourg may at first seem complex, the application process is actually straightforward, just fill out a form and send it to the CNAP.

It is important however to think about retirement early and make forecasts and simulations and take the necessary steps such as subscribing to an additional private pension plan if applicable to ensure you have a pension that matches the standard of living you expect to have.

faq

Frequently Asked Questions (FAQ)

What is the minimum pension amount in Luxembourg?

Can I receive a Luxembourg pension if I live outside the country?

How long does the pension application process take?

Are expats eligible for a Luxembourg pension?

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