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Pension savings

 All about pensions:

1. The pension system
The pension system is currently based on three pillars:

1st pillar: the national pension scheme
The first pillar is based on social security funds. The national pension scheme is largely funded by the national welfare programme on the principle of distribution without the need to have built up reserves. However it is affected by demographic stability. This first pillar represents a kind of minimum social retirement income for the majority of the population. Contributions paid today help to finance tomorrow’s pensions. They never go towards your own pension.

2nd pillar: the workplace pension
The second pillar is better known by the term “Pension Plan»”. It is directly linked to a job or a profession. It is a supplementary pension set up by the company for their staff. Welfare no longer plays a central role, the preferred criteria being intergenerational equity and macro-economic efficiency. Second pillar schemes are funded by capitalisation and are managed by private organisations such as life insurance companies. Funds are not guaranteed by the State but are governed by the law of 8 June 1999 on "Supplementary Pension Schemes established by Employers". It is this same law that outlines the tax incentives for personal contributions paid by the employee to top up employer funding.

3rd pillar: private pension plans
The third pillar is a complementary savings and pension product. It's based on a personal savings or an insurance policy: everyone pays the premiums established in a personalised contract. Welfare gives way to the sharing of risk. It is no longer a profession that determines the individual plan, but financial efficiency. The great attraction of the third pillar are the tax advantages which the legislators have granted to the "pension planning" system.


2. Pension plan: its new fiscal framework:
Legal framework for the new pension regime
By implementing the Grand Ducal Regulation of 25 July 2002 giving effect to article 111a of the tax law, the legislator has decided to implement new tax incentives. The purpose of this is to encourage individuals to establish an individual pensions savings plan.
Some facts:

  • the value of the state pension will be much lower than your final salary. Faced with the demands of modern life it will be difficult to have to live on less during your retirement;
  • the issue of funding pensions has become the subject public debate both in Luxembourg and abroad;
  • uncertainties about demographic change and economic growth is clearly reflected on the balances of pension schemes. This is why the funding of pensions for future generations has generated a heated debate on the 700,000 inhabitants projected by 2050.

You must take the initiative and act now

3. Pension plans: tax deductions:
You can benefit from a large annual tax reduction on your taxable income with a "PENSIONS" policy. Deductible premiums vary depending on your age at the start of the tax year:


Maximum annual deductions limit

Under 40

1,500 euros

Between 40 and 44

1,750 euros

Between 45 and 49

2,100 euros

Between 50 and 54

2,600 euros

Between 55 and 74

3,200 euros

If you like, deductible premiums can be automatically adjusted to your age at the beginning of the tax year.
•  The benefits you receive are taxed as follows:
•  Only half of your annuities are taxed;
•  Single lump-sums are subject to a reduced tax rate


 Calculate: How much is your pension worth?

We organise regular conferences on pensions to help you find out how much your pension is worth.

We also run a free pensions check to tailor the results to your situation.

Your situation will be thoroughly reviewed and you will leave the meeting knowing all the options available to you. For example:

Click here to request an obligation free meeting


 What kind of products are there?

1. Fixed interest pension plan:
With a personal pension plan you can opt for two types of savings. The first is to invest in a fixed rate product. This product lets you build up a capital established at the start of your policy. The advantage is that you know in advance what your pension will be worth. The annuity associated with this capital will be calculated when your policy matures.

2. Equity pension plan:
The second option for your pension savings is an equity fund investment. In this case the investor will receive a monthly annuity for the rest of their life. This annuity will be calculated at the end of the policy based on the accrued capital. The investment has no limit until you reach 45. After that, the portion invested in shares is limited to offer maximum security when your policy matures. There is no guaranteed amount with this type of product since it is invested on the stock market and fluctuates according to stock prices.

Age at start of tax year

Maximum portion of pension invested in stocks

Under 45

no limit

from 45 to 49

75% of accrued savings

from 50 to 54

50% of accrued savings

55 and over

25% of accrued savings


Click here to request an obligation free quote



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