The context of the legal pension in Luxembourg
According to a recent report by the IGSS[1], the reserves of the general scheme exceeded EUR 18 billion in 2017 thanks to a dynamic increase in revenue, due to the increase in employment and income, as well as the proactive maintenance of the contribution rate at 24% (8% for each of the three partners: insured, employers and State).
Despite this favorable situation in the short and medium term, the impact of the aging of the population, tempered by recent net immigration and by the number of cross-border workers, will be decisive in the years to come. Indeed, life expectancy at birth will increase from 79.4 years in 2015 to 85.4 years in 2060 for men and from 83.9 years in 2015 to 89.5 years in 2060.[2].
So, the number of years spent in retirement on average [3]should develop positively in the future.
With unchanged policy, the IGSS provides that :
- the pure pay-as-you-go premium will exceed the overall contribution rate (24%) in 2024 ;
- the reserve will fall below the legal limit (1.5 times the annual amount of benefits) in 2035 ;
- the reserve will be exhausted in 2041.
In view of this development, the rate of replacement of the average salary by Luxembourg legal pensions of 78% in 2013 should fall in the medium and long term [4].
In order to counter the negative evolution of pillar 1 (statutory pension) and stimulate alternative means of financing the pension, the 2017 tax reform of pillar 3 (retirement provision – art. 111bis LIR) was implemented.
On January 1, 2019, the reform of pillar 2 (addition of the RCPI to the existing RCP company pension scheme) will strengthen the additional funding for pillar 1.
1 | Contact us to check if you are eligible for an RCPI
[1] Pension working group report of 16 May 2016
[2]Source : Eurostat
[3] That is 22.6 years on average for men and 25.6 years on average for women.
[4] Based on an average salary that exceeds the national averages by 50%, the replacement rate in Luxembourg falls to 72.5% (compared to 35% in Belgium, 37.5% in Germany and 48% in France).
Consult the report of the working group by clicking here
Disclaimer :
The responsibility of the author of the article cannot be engaged in the event of inaccuracies or omissions. Despite the care taken with the information provided, this new legislation is subject to constant change. Only a personalized interview will make it possible to verify the eligibility of the self-employed person for an RCPI and their income that can serve as a contribution base for an RCPI