The 3 pillars of the Luxembourg pension system
Luxembourg's pension system is based on a three-pillar architecture, with each pillar playing a complementary role in guaranteeing you a comfortable retirement.
First pillar: the statutory pension
This is the foundation. The statutory pension is a public pay-as-you-go scheme managed by Luxembourg’s National Pension Insurance Fund, the Caisse Nationale d'Assurance Pensions (CNAP). The amount you receive depends on three main criteria:
- Your age: the statutory retirement age is 65, with the possibility of early retirement at 57 or 60 under certain conditions.
- The contribution period : known as the "stage", it requires a minimum of 120 months of contributions in the European Union (including at least one year in Luxembourg). A full career of 40 years is required to qualify for a full pension.
- Your income during your period of employment.
While this first pillar provides a solid foundation, it is usually not enough to maintain your normal standard of living. This is precisely where the supplementary pillars come in.
Second pillar: the supplementary company pension
This optional scheme allows your employer to offer you a supplementary pension scheme. According to the latest available statistics, only 6.20% of employers in Luxembourg offer an active or closed supplementary pension scheme (SPS).
If you are fortunate enough to benefit from one, this company pension will be added to your statutory pension. But what if your employer doesn't offer this type of scheme?
Third pillar: individual retirement savings
This is the best way of securing your financial independence. The third pillar allows you to build up your own retirement savings with a private insurance company.
This option also offers you a tax benefit: your contributions are deductible from your annual taxable income (Article 111bis of the Income Tax Law), provided you take out the policy for a minimum of 10 years and maintain it until the age of 60. Each taxpayer may deduct up to €3,200 a year, regardless of age. When the time comes, your capital will be subject to a preferential tax rate.
The pension reform presented by Prime Minister Luc Frieden in 2025 marks a decisive turning point. Faced with demographic challenges and longer life expectancy, the government has announced a number of structural measures:
Gradual extension of the contribution period
The reform's key measure involves extending the compulsory contribution period by three months per year over several years. In practical terms, if you are 45 today, you will have to work between 2.5 and 3 years longer than the previous generation to qualify for a full pension.
Phased retirement
To smooth this transition, the reform introduces a more accessible phased retirement scheme. People in their fifties and sixties will therefore be able to gradually reduce their working hours while receiving the first benefits of their pension as additional income.
An overstretched system
These adjustments reflect an inescapable reality: the pay-as-you-go public pension system is coming under increasing strain. The ratio of active contributors to pensioners is deteriorating, and demographic forecasts afford no grounds for optimism.
In this context, relying solely on the first pillar becomes risky. The amount of your statutory pension will probably be insufficient to maintain your current standard of living. The government has already announced that it will review the pension system again in 2030.
Time is your best ally when it comes to saving for retirement. The earlier you start, the more the compounding effect works in your favour, and the lower the monthly cost of achieving your goals.
The three-pillar system remains solid, but its balance is inevitably shifting towards the supplementary pillars. The statutory pension won’t go away, but your future quality of life will increasingly depend on your ability to save intelligently.
Need to estimate your future pension?
Visit the CNAP website (www.cnap.lu) to simulate your entitlement to a statutory pension.
