Pension reform in Luxembourg: promises and reality
Curated Lifestyle, Unsplash
The issue of pension payments in Luxembourg has been hotly debated against the background of data showing that between 2013 and 2023 the number of pensioners increased by 69 per cent, from 5,080 to 8,586. Most of them (82.4% in 2023) received increased coefficients thanks to recalculations that take into account retirement age and length of service. However, despite the increase in payments and the increase in the minimum threshold for receiving these coefficients, the average retirement age remains stable at 60-61 years.
Key Indicators of Reform:
- Pro-rata allowances: the coefficient increases by 0.015% for each year the threshold is exceeded, but cannot exceed 2.05%.
- Parameter evolution: from 2013 to 2024, the minimum threshold increased from 93 to 95 and the premium factor for each year increased from 0.010% to 0.015%.
- In 2023, the average age of retirement with the increased multiplier was 60.9 years.
- In 2023, the average length of employment exceeded 40 years.
Although the pension system provides financial incentives for later retirement, data analysis shows that citizens' behaviour has not changed much. Despite an increase in the minimum threshold and a gradual decrease in the number of years above the threshold, there is no significant shift in the increase in the duration of professional activity.
The Ministry of Health and Social Protection notes that the mechanism, in fact, fulfils its role in terms of increasing benefits, but does not yet serve as a motivator for later retirement. Clearly, the problem requires a comprehensive approach: an increase in the financial incentive should be accompanied by more flexible conditions for the professional development of older workers and social support programmes.
