Whether it's a state pension, or a private one, it's crucial you plan ahead to ensure a comfortable retirement.
This article sets out the three types of pension available in Luxembourg - state pension, company pension, and personal pension.
The application process is relatively straightforward, but the eligibility rules are a complex tangle of different requirements. Let's untangle the mess and find out what you could get, and when.
State pension
What is it?
Anyone who has contributed towards social security (known as mandatory insurance) for at least 12 months (1 year) is eligible for a Luxembourg state pension. If you've contributed for at least 120 months (10 years) in Luxembourg or another EU country (or some others, e.g. Switzerland, Iceland), your whole career is taken into account. After 480 months (40 years), you're eligible for the full pension.
It's not quite true to say you need to have been working for this period, as mandatory insurance includes time when you're receiving unemployment, sickness or maternity benefit, as well as parental leave and various other types of approved leave such as youth volunteering or caring for a dependant.
You can also count various other activities towards the 40-year threshold, under the 'equivalent insurance periods' regime, including study between the ages of 18 and 27, time spent rearing children under the age of six, and periods when you're in receipt of disability benefit.
How much is it?
The full state pension is currently a little over €3,850 a month, whereas the partial pension is around €1,250.
When can I get it?
State pension age is generally 65, but if you've met the 40 years of mandatory insurance contributions by age 57, you can retire then. Alternatively, you can retire at 60 providing you've got 40 years of overall contributions (including for 'equivalent' periods such as time and child-rearing), as well as at least 10 years of insurance contributions.
How do I apply?
Upon nearing your retirement, fill out an application form from theNational Pension Insurance Fund (Caisse nationale d’assurance pension - CNAP), available here, and send it to the address specified on the form.
Cross-border workers should apply via authorities in their country of residence, details here.
Other state pension entitlements
Survivors' pensionapplies in the event of the death a spouse or legal partner. This includes cases where couples are divorced, or the person who is next in the direct line of descent in the event that an insured person dies without a surviving spouse or partner (see our guide to inheritance here). You apply for a survivors' pension via CNAP, details here.
Child-raising pensionor "Mammerent" is for parents or legal guardians who have devoted themselves to bringing up one or more children. It's available at age 65 for those who aren't eligible for a general pension, but have had at least one child born in Luxembourg. Details here.
Disability pensionis for those under the age of 65 who are unable to work. Cross-border workers are also eligible for the pension, and should apply via their local pension authority. Details on how to apply here, or see our article first on disability support and long-term care insurance.
Company pension
What is it?
Better termed a 'supplementary pension', this forms pillar two of Luxembourg's pension system. It's available to employees via their companies, but also to the self-employed.
Employers generally offer one of two types of pension. The first, defined contribution, involves a set amount paid by both employer and employee to their pension pot every month. This is then invested on your behalf until retirement. The second, defined benefit, is generally considered better for employees, but is increasingly rare these days. It guarantees a certain level of pension at retirement, irrespective of how pension investments have performed.
You can top up your supplementary pension with additional personal contributions, which are deductible from income tax up to the value of€1,200 a year. More details on the tax treatment here.
When can I get it?
That will depend on the rules of the pension scheme, but generally between age 60 and 65. There may also be an early retirement option - check with your employer or directly with the pension provider.
How do I apply?
If you're employed, the pension should part of your overall employment package. If you're unsure whether or not you're enrolled, check your payslip to see if you're contributing to a pension scheme. Ask HR about options for making additional contributions to your pension.
If you're self-employed, you can choose a private pension provider yourself. Shop around for the best deal - banks and insurance companies generally offer a self-employed pension option.
Personal pension
What is it?
Personal pensions, also known as personal retirement savings plans, are the third pillar of Luxembourg's pension system. Pensions either accumulate in savings accounts, or can be put into investment funds.
The obvious benefit of a savings account is that the money in there is guaranteed (at least up to the EU deposit guarantee of €100,000 per bank). However, returns tend to be lower than investment funds. With the latter, however, the value of your pension pot could go down as well as up. If you're not sure what's the best option for you, consider speaking to a financial advisor.
Luxembourg's tax system provides an incentive for personal pensions in the form of a tax deduction of up to€3,200 per year, irrespective of the age of the policyholder. More details here.
When can I get it?
The scheme must be for a minimum 10 years, and mature when you're aged between 60 and 75. In practice, this means you can get your personal pension from age 60.
How do I apply?
As with pensions for the self-employed, personal retirement savings plans are available from a wide range of banks and insurance companies.
When choosing a personal pension, make sure you consider what fees are charged by different providers. You should also pick something which suits your risk appetite, that is, if you're unwilling to risk losing value through investment, consider choosing a competitive savings account. Also take a look at how frequently funds can be contributed (generally monthly, quarterly or semi-annually), how easy it is to withdraw your money, and what options are available when the savings plan matures.
