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The reserves of the National Pension Fund are no longer sufficient, argues the director of the Union of Luxembourg Enterprises (UEL). Are our pensions too high? Ahead of a major debate set to launch in October by the Minister of Social Security, Martine Deprez, where is Luxembourg headed and what are the potential solutions?
Michel Reckinger, president of the UEL, emphasised a key point in an interview with RTL: "National and international experts agree that from 2027, pension expenditures will exceed revenue, and the reserves are expected to be exhausted by around 2040,” he warned.
A report from the Economic and Social Council published in July highlighted the stark disagreement between employers and unions over the future of the National Pension Insurance Fund (CNAP). In fact, the Council was unable to present a unified conclusion and instead published two opposing viewpoints.
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Increases in contributions are unfair: UEL
Reckinger explained that two main levers can be used to reform the pension system: either reduce spending or increase contributions.
The UEL firmly opposes any increase in contributions. “Increases in contributions are fundamentally unfair in terms of generational equity,” he stated, before adding: “The young will have to pay so that the older generation doesn't have to sacrifice anything.”
He also pointed out that increasing contributions would negatively impact employees by reducing their net salary and lowering purchasing power. Furthermore, higher contributions would harm the competitiveness of Luxembourg’s businesses.
Practical Information:Everything you need to know about pensions in Luxembourg
Reconsider the inclusion of study years?
According to Reckinger, reforms should target expenditure. He repeated his main point: “No pensions without contributions.” He explained that the current system grants benefits for which some individuals never contributed—specifically, years spent studying, raising children, or being unemployed.
For instance, years of study are currently counted towards pensions up to the age of 27, even if no contributions were made during that time. “It is unfair for those who do not pursue higher education,” he said, noting that this measure was introduced in the 1970s when fewer people attended university. Today, the situation has reversed, and many more young people pursue higher education than before, making this policy outdated.
Reckinger clarified that UEL is not opposed to recognising periods of education or unemployment but argues that these should be financed by the respective ministries, such as Family or Labour, and not by the CNAP.
Are such high pensions even necessary?
The average pension for someone who has contributed for 40 years in Luxembourg is €2,244.82, but the maximum pension can reach €10,392.67.
While Reckinger acknowledged that no one wants to see “starvation pensions” in Luxembourg, he raised the question of whether such high pensions are truly necessary. Various forms of assistance, such as the cost-of-living allowance and solidarity fund, already exist for pensioners in need.
He also pointed out that Luxembourg's pension replacement rate is 86%, meaning retirees receive 86% of their last salary as a pension. This is significantly higher than the OECD average of 61%. "There’s a large margin there," Reckinger noted, suggesting that the issue of high pensions must be addressed in the upcoming debate.
Reckinger also questioned why the community should bear the cost of high state pensions. In the private sector, both employees and employers contribute 8%, with the State matching that contribution. However, civil servants receive their pensions directly from the State, which covers the remaining cost. “We need to ask ourselves why the public should be funding these high state pensions,” he concluded.
