Pension insurance in Luxembourg is based on a concept known as the 'three pillars'. Here's all you need to know to make the most of your pension.

If you're employed in Luxembourg, you may already be familiar with the so-called 'pillars' of retirement. But if not, our colleagues at RTL Infos have prepared a rundown of everything you need to know.

Pillar #1: social security

According to, expenses for pension insurance are divided across three pillars:

  • mandatory social security contributions and deductions;
  • contributions paid to a supplementary pension scheme set up by the employer;
  • premiums paid to a private pension plan (on the taxpayer's own initiative).

The first pillar is social security - a pension to which every employee is required to contribute, which is later paid through the social security system. This is the most commonly-known pillar.

Contributions are deducted from an employee's gross salary, and used to supplement the National Pension Insurance Fund, alongside contributions from employers and the State. The principle is one of solidarity: you contribute for current pensioners, and future employees will fund it during your retirement.

This first pillar is obligatory and is what most pensioners rely on after completing their years of work (currently, a full rate pension relies on 40 years of work). It is also subject to several false beliefs, such as the common myth among cross-border workers that an employee needs ten years of contributions in Luxembourg to benefit. In reality, it is ten years of contributions in a European country, or a nation which has an agreement in place with Luxembourg.

An employee with 40 years of social security contributions behind them can claim a minimum of €2,219.71 per month for their pension, according to data from 1 September 2023.

Pillar #2: company pensions

The second pillar is largely dependent on the employer. Companies are able to set up supplementary pension schemes for their employees, which sees the employer contribute a defined percentage of an employee's salary. The employee is free to supplement this even further with a percentage of their pay.

This scheme is usually accompanied with a tax advantage, as up to €1,200 of contributions can be withdrawn from an employee's taxable income each year, or the equivalent of €100 per month.

Upon ending the job contract, the benefits are exempt from taxes in Luxembourg because these are paid by the employer upon entry. However, cross-border workers could be taxed in their country of residence, although in Belgium there is a tax agreement to prevent this scenario from occurring.

Pillar #3: private pension plans

The third and final pillar, that of private old-age provision, is optional. Employees, cross-border workers and residents may take out private pension plans with a Luxembourg banking or insurance establishment.

People who do so may benefit once again from a tax advantage: up to €3,200 of contributions can be subtracted from your taxable income each year (€6,400 per year for couples). However, these advantages are conditional: the contract for the pension plan must have a duration of at least ten years. When the contract ends, payment can be made in a number of forms (capital, life annuity or annual withdrawal) and with varied, but advantageous, taxes for people over the age of 60.

RTL Infos video in French: