Understanding the new pension reform in Luxembourg

On 18 December 2025, the Luxembourg Chamber of Deputies adopted a reform of the pension system, which came into force on 1 January 2026. Resulting from the consultation programme “Schwätz mat!”, this reform aims to ensure the financial sustainability of the general pension scheme until 2042 while maintaining the legal retirement age at 65.

In response to population ageing and increased life expectancy, Luxembourg has adapted its model of intergenerational solidarity. This article presents the main measures adopted and their practical application.

 

1. Why this reform?

A system under demographic pressure

Luxembourg is facing a major demographic shift: the ratio between contributing workers and retirees is gradually declining. Actuarial projections showed that, without adjustment, the reserves of the general pension scheme would have been depleted before 2050.

The two pillars of the reform

The reform is based on two main pillars:

• First pillar: Align the effective retirement age with the legal age
  The average effective retirement age in Luxembourg is currently around 60, five years below the legal age of 65. The reform aims to gradually reduce this gap by tightening the conditions for early retirement at 60.
• Second pillar: Strengthen funding
  Increasing the contribution rate allows the system to be funded immediately and extends the sustainability of the reserves until 2050.

 

2. Increase in contributions since 1 January 2026

New scale

The overall contribution rate to the pension scheme has increased from 24% to 25.5% of gross salary. This 1.5-point increase is shared equally among the three contributors :

 

For self-employed workers:

Their personal contribution is 17%, supplemented by 8.5% funded by the State, for a total of 25.5% as well.

This increase is set to remain in place until 2032.

 

Impact on salaries

Example for a gross monthly salary of €4,000:

• Employee contribution before the reform: €320 (8% of €4,000)
• Employee contribution since 2026: €340 (8.5% of €4,000)
• Monthly difference: +€20
• Annual difference: +€240
   

3. Early retirement: gradual extension from July 2026

What does not change

• The legal retirement age remains 65
• The possibility to retire at 57 after 40 years of mandatory contributions is maintained

What changes: retirement at 60
From 1 July 2026, the conditions for early retirement at 60 will be gradually tightened. The minimum required insurance period will be extended by a total of 8 months between July 2026 and 2030

 

Specific early retirements remain unchanged

Early retirement schemes for shift work, night work, or company restructuring are not modified.

 

4. Progressive pension: new scheme since January 2026

Principle

The reform introduces a progressive pension scheme, already applied to civil servants and now extended to the private sector from 1 January 2026.

 

How it works

A person meeting the following conditions can benefit from a progressive pension:

• Have a minimum insurance career of 40 years
• Obtain the employer’s agreement
• Reduce their working hours to part-time
   

The employee can then reduce their professional activity while receiving a portion of their retirement pension proportional to the reduction in working hours. This system allows a gradual transition to full retirement.

 

5. Years of study: removal of the age limit

Change effective from 1 January 2026

Before the reform, periods of higher education (without income) could be counted toward the insurance career up to a maximum of 9 years, provided the studies were completed before the age of 27.

Since 1 January 2026, this age limit of 27 has been removed. Now, all years of study after the age of 18 can be validated, regardless of when they were completed in life.

 

Who is affected?

 This measure mainly concerns individuals who:

• Returned to studies later in life (career change)
• Completed long study programs (medicine, PhD, etc.)
• Interrupted and then resumed their academic path

The maximum limit of 9 years of study remains in place.

 

6. Introduced tax measures

Increase of the third-pillar ceiling

Since 1 January 2026, the annual tax-deductible ceiling for retirement savings contracts (third pillar) has increased from €3,200 to €4,500 per year per taxpayer.

In practice, individuals contributing to a third-pillar product can now deduct up to €4,500 from their taxable income, compared with €3,200 previously.

 

Retention in the workforce tax allowance (AMVP)

A new tax allowance has been introduced for individuals who continue working even though they could take early retirement.

Conditions:

• Meet the requirements for early retirement (57 or 60 years with sufficient insurance years)
• Choose to continue working instead of retiring
• Remain employed until the legal retirement age of 65

Amount:

• Reduction in taxable income of up to €9,000 per year (€750 per month)

Procedure:

• An eligibility certificate must be requested from the CNAP or the EAVIP, depending on professional status.

 

7. What remains unchanged

Several elements of the pension system are not affected by this reform:

• Legal age: 65 remains the reference age for a full pension
• Retirement at 57: maintained after 40 years of mandatory contributions
• Specific early retirements: schemes related to shift work, night work, or company restructuring remain unchanged
• Ongoing pensions: no reduction for those already retired or reaching the legal age in 2026
   

8. Summary timeline

 

Conclusion

The 2026 pension reform in Luxembourg introduces structural changes aimed at ensuring the sustainability of the system until 2050. The main measures are:

• An increase in contributions by 1.5 percentage points, shared between employees, employers, and the State
• A gradual extension of 8 months in the required insurance period for retirement at 60, effective from July 2026
• The introduction of a progressive pension to facilitate the end of working life
• Removal of the age limit for validating years of study
• Two tax measures: an increase in the third-pillar ceiling and the creation of a tax allowance for those who continue working
• The legal retirement age remains 65, and those already retired or nearing retirement are not retroactively affected
   

For more information, consult the official CNAP website (cnap.public.lu) or the Guichet.lu portal.

 

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Sources :

• Law of 18 December 2025 on the pension system reform
• CNAP – National Pension Insurance Fund
• Chamber of Deputies of the Grand Duchy of Luxembourg