The European Union has criticised Luxembourg’s pension reform

The pension reform adopted in Luxembourg on 1 January 2026, which involved increasing employees’ social security contributions from 24 per cent to 25.5 per cent and a gradual increase in the retirement age, proved insufficient to ensure the system’s long-term financial sustainability. In a special report, the European Council described these measures as too lenient. According to the regulator’s calculations, without sustained annual employment growth of 2–3 per cent, the country’s main pension fund risks running a deficit as early as 2029, whilst experts at the Idea Foundation predict that a deficit will arise by 2031.

Demographic changes and the inefficient utilisation of the older generation’s labour force remain the key causes of the growing imbalance. In particular, the employment rate among citizens aged between 55 and 64 in Luxembourg stands at just 51.9 per cent, which is significantly lower than the European Union average (69.5 per cent). At the same time, local residents retire earlier and spend an average of 25.2 years in retirement, compared with 21.3 years in EU countries. Combined with high pension payments, this trend places a critical strain on the state budget.

The European Council strongly recommends that the authorities restrict early retirement options and encourage employment amongst older people. Statistics show that between 2005 and 2025, the number of pensioners in the country almost doubled, outpacing the growth in the number of contributors. Analysts estimate that the measures adopted by the government will prove insufficient in the long term, and the new cabinet following the 2028 elections will have to revisit the issue of reforming the system in the early 2030s, choosing between cutting benefits and further increasing the tax burden.