The Compensation Fund (FDC) suffered a sharp decline in its reserves during this period.
However, it is crucial to note that this decline is not attributed to issues related to the pension system itself but rather stems from the challenging economic conditions experienced throughout the year.
The financial markets were adversely affected by the prolonged disruption caused by the war in Ukraine, leading to increased inflation and consequently impacting the fund’s performance.
In stark contrast to an exceptional gain of 11.44% in 2021, the reserve’s investments posted a negative return of 11.93% in 2022. Consequently, the reserve saw a substantial reduction of over €2.54 billion.
As of the end of 2022, the FDC held €24.54 billion invested in various assets, including equities, bonds, and property. This amount is equivalent to 4.29 times the annual expenditure of the National Pension Insurance Fund (CNAP).
Alain Reuter, the president of FDC, acknowledged the need for strategic adjustments and stated that the fund has adopted a new investment approach for the years 2023 to 2027.
This revised strategy includes a stronger emphasis on “sustainable” financing and incorporates an investment component aligned with the principles of the Paris Agreement.
The move comes in response to criticism surrounding the compensation fund’s investments, some of which were deemed highly polluting.
In the short term, the CNAP affirms that the pension system remains balanced, as its expenditure (21.89%) is lower than the contributions received (24%).
However, concerns arise about the long-term sustainability of the system, as there is a potential risk of facing significant expenditure growth to sustain pensions. If this trend persists, the reserve could potentially be depleted by the year 2047.
Another notable trend observed in 2022 is the significant majority of pensions being paid to individuals residing abroad. Out of a total of 105,493 pensions paid by CNAP, only 49.84% were disbursed within Luxembourg, while the majority of pensioners live abroad, primarily in the EU (constituting 48.81% of the total).
