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Where do our contributions go? Luxembourg Pension Fund explains why citizens cannot choose where they want their investments to go

Last time updated
24.03.25
Pensions in Luxembourg

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Luxembourg's Ministry of Health and Social Protection has given a detailed response to a parliamentary enquiry by MP Marc Goergen on the ability of citizens to control how their pension contributions are used, especially in the context of investments in arms-length or unethical companies.

Minister Martine Deprez emphasised: Luxembourg's pension system is based on intergenerational solidarity and is financed on a pay-as-you-go basis - not a contributory one. This means that current contributions from employees go directly to pay pensioners. Therefore, individual contributions do not form personal savings, and a citizen cannot influence how his or her money is used within the system.

Part of the funds not used for current payments is transferred to the reserve - the Pension Compensation Fund (FDC). This fund invests the funds according to the principle of risk diversification: by sector, country and asset category. Investments are strictly regulated by Article 248 of the Social Security Code.

Importantly, there are no massive investments specifically in arms companies or other controversial sectors. Moreover, as emphasised in the response, in recent years the FDC has increasingly used the principles of responsible investment and publishes reports on its website: fdc.public.lu/investissement-responsible.

The Government and the Minister responded negatively: the current model excludes the possibility of individual choice of investment policy. The Social Security Code (Articles 260-268) clearly defines the powers of the Fund, and it is managed by a Board consisting of representatives of the state and social partners - employers and employees - who form the contribution part of the budget.

Thus, investment choices are a collective, institutional decision, not an individual option.

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Last time updated
24.03.25

We took photos from these sources: Getty Images

Authors: Alex