Home A guide to the Luxembourg pension system
Last update on November 04, 2019

This helpful guide explains how the Luxembourg pension system works when you’re an expat, plus the conditions and processes for claiming a pension.

With one of the best healthcare systems in Europe, and no restrictions on foreigners getting a mortgage, Luxembourg is a desirable country to settle down in or spend your retirement. Claiming a Luxembourg pension should be possible for anyone who lives or works in the country; regardless of whether you are a native. Certain conditions will apply, however, and the amount you are entitled to receive will vary.

If you are not covered by the pension scheme in Luxembourg, it may be possible to transfer an international pension. One way to do this is via an offshore pension scheme. This helpful guide explains everything you need to know about pensions in Luxembourg, including the following topics:

The Luxembourg pension system

The pension system in Luxembourg is made up of several ‘pillars’. This includes the public tier state pension, occupational pensions, and personal pensions; these are overseen by Caisse Nationale d’Assurance Pension (CNAP) government administration.

Workers can claim a full and partial version of Luxembourg’s state pension (pension de vieillesse in French / Altersrente in German). What they will get will depend on the number of years they have made social security contributions for by the time they reach the age of 65. This is Luxembourg’s retirement age, and when people can start claiming the state pension.

It was recently revealed that around 98,470 people currently receive an old-age state pension in Luxembourg; 35,050 of which receive the full pension, and the remaining 63,420 receive partial pensions. Many people receiving partial pensions in Luxembourg are expats who also have pension income from elsewhere; as a result of living in several countries throughout their working lives.

Who is eligible for pensions in Luxembourg?

Pension age in Luxembourg

As previously mentioned, the official state pension age in Luxembourg is 65. To qualify for payments, you will need to have made at least 10 years’ worth of social security contributions by the time you reach your 65th birthday. This will entitle you to the partial state pension.

To claim the full state pension, you must have made social security contributions for at least 40 years (or 480 months). The earliest you can start receiving the state pension is aged 57, and you must have made 480 months contributions to be eligible. There is also the option to retire when you reach 60; as long as you have made the required contributions.

Who can claim a state pension in Luxembourg?

Expats who have moved to Luxembourg to live and work shouldn’t come across any additional barriers when it comes to claiming the state pension. Foreigners have an equal right to claim the state pension in Luxembourg as those who were born there. They must, however, have made the required amount of 120 months of contributions.

What happens if you are not eligible for a full pension?

If you haven’t made enough social security contributions to qualify for even the partial state pension by the time you reach your 65th birthday, it may be possible to claim that money back.

There is a service where you can apply to have your social security contributions reimbursed (link in French). You can also apply for reimbursement if you have paid more than 40 years’ worth of contributions before claiming your pension.

Those applying for a reimbursement must be over the age of 65, and not benefit from a personal pension based on the contributions in Luxembourg, or in any other country.

Your application must have already been made by the time the pension is paid, otherwise your rights to your contributions will be lost. You can find out more in our guide to the social security system in Luxembourg.

Pensions in Luxembourg for expats

QROPS: transfer and consolidate your UK pension

Expats moving abroad from the UK may be able to transfer their pensions into a Qualified Recognized Overseas Pension Scheme (QROPS). This allows expats to consolidate their pensions into one plan. Furthermore, it helps them manage their retirement funds more easily and avoid currency fluctuations.

There are many advantages to QROPS, however they are not suitable or available to all UK pensioners. Therefore, it is highly advisable that you seek advice from an expert financial adviser. Read more in our full guide to QROPS.

Luxembourg pension rates and contributions

Pension contributions

Currently, anyone who decides to live and work in Luxembourg must pay a 24% gross income of their earnings to the government’s fund for state pensions and benefits for invalidity citizens.

There have recently been concerns about whether or not the current level of contributions will be enough for the soon-to-retire baby boomer generation. Another consideration is whether the workforce can support this great retirement demand.

In certain circumstances, the government will record that you have made contributions during a time when you haven’t technically made any. Those aged between 18 and 27 who spend years in official study or professional training will have those years counted towards their contribution total.

Therefore, for example, while you may not be in employment during a four-year university course, the government will still count those four years as though you were making contributions. To claim these years, you will need to include any diplomas or enrolment certificates when you submit your application to receive your pension.

Pension rates

The pension payments you receive usually equate to around 71% of your average salary during the years you were making contributions; up to a maximum of €8,525.50, and at a minimum of €1,841.51.

The average monthly payments tend to fall somewhere in between; most people currently receiving a full state pension in Luxembourg receive €3,000 to €4,000 a month.

The pension you receive depends on how long you paid contributions for, and the salary you earned. Therefore, someone who is on a high salary, and paid the full 40 years of contributions, will receive higher state pension payments than someone who is on a low wage and only made 15 years’ worth of contributions.

If you receive a partial state pension, you are likely to receive between €746.90 and €1,244.59 per month.

Supplementary pensions in Luxembourg

Company pensions

Many companies will offer company pensions to expat employees. These are the second pillar of the Luxembourg pension system. With a company pension, both you and your employer will pay in to the fund; usually, a payment will be taken from your salary each month. You will be able to access the cash once you reach retirement age.

Company pensions come with a few great perks. Firstly, as the money to fund the plan is taken directly from your salary before you receive it, it is tax-free. Secondly, the amount your employer adds is usually matched to your own social security investment. This means that you will end up with money to live on in retirement. Thirdly, you can claim your company pension benefits from between the age of 60 to 65; potentially earlier than the state pension. What’s more, a “death in service” benefit is usually included; this will provide money to your family, should you be killed at work.

When deciding whether to get a company pension, and how much money you will need in retirement, it may be worth consulting with a professional pension planner. Most people living in Luxembourg opt for balancing their pension investments between social security, a company pension, and personal savings.

Personal pensions

Personal pensions are Luxembourg’s third pension pillar. They are essentially savings accounts that you can open with your bank, except that you won’t be able to access the money until you reach retirement age.

You make all of the contributions in a personal pension; there is no additional help from employers or the government. When you reach retirement, you can usually choose whether to make a lump sum withdrawal, or receive monthly annuity payments. The lump sum cannot exceed 50% of the total savings.

It is wise to consider the tax implications of receiving income from a personal pension when deciding whether to take a lump sum. This is because lump sums are considered to be ‘extraordinary income’, and are taxable at half the overall rate, the year that you make the withdrawal.

You will have to submit an income tax return to declare any income from a private pension. It may be useful to get help from an accountant to make sure that you get this process right. There is a chance that you will be taxed by your country of residence if you are not considered a resident of Luxembourg for tax purposes.

In addition to all of this, there are also hidden taxes and rules on how your personal pension fund is stored. Upon an early death, for instance, there are restrictions to pay-outs depending on your circumstances and other retirement schemes. For this reason, seeking financial advice ahead of your retirement is strongly advisable.

Other pensions in Luxembourg

Survivor’s pension in Luxembourg

If your spouse dies, you could qualify for a survivor’s pension (pension de survivant in French; Hinterbliebenenrente in German). To be eligible, they must have either been employed and insured for a survivor’s pension, or have been receiving an invalidity or old-age pension at the time of death.

To be eligible as a spouse, you must have been married for at least a year. Furthermore, the deceased partner must not have been receiving an invalidity or old-age pension when you got married. Divorced surviving spouses can also get a survivor’s pension; as long as they have not remarried by the time of death. However, it does get tricky if you are not married, as the pension will instead go to direct blood relatives and direct relatives by marriage; regardless of whether you have been living together or are long-term partners.

Invalidity pension in Luxembourg

There are additional invalidity pensions (pension d’invalidité in French; Invaliditätsrente in German) to help those who suffer from a disability which was caused by an accident, or those who have been diagnosed with certain illnesses or incurable diseases.

To be eligible for this benefit, you must have made a certain number of insurance payments. On application, you must provide evidence of insurance payments adding up to at least 12 months over the three years before the date the disability or illness was diagnosed. This evidence must be verified by someone in the social security medical control sector. While it is not necessary to be insured when the invalidity occurred, some proof of insurance payments from beforehand needs to be shown to prevent any suspicion.

Applying for your pension in Luxembourg

If you want to apply for the state pension, you will have to send an application form to Luxembourg’s National Pension Insurance Fund (Caisse nationale d’assurance pension – CNAP). You will need to do this a few months before you plan to retire.

After a period of consideration, your request will either be accepted or rejected. If you don’t get the decision you want, there may be an opportunity to make an appeal through CNAP. You will need to explain why you disagree with the decision; you should also be prepared to provide any relevant evidence to prove your points. If you hold a company or personal pension, you will also have to apply to CNAP a few months before you wish to start withdrawing money from the funds.

Pensions advice in Luxembourg

It is usually best to seek professional advice from a financial adviser or your local pensions office when planning your retirement abroad. It is good practice to seek advice in all countries where you have participated in pension schemes. Alternatively, you can consult an international advisor to ensure you maximise your pension income and avoid unnecessary tax penalties.

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