Gradual shift for early retirees begins in July 2026

The first details of Luxembourg's planned pension reform have been presented, revealing that a number of residents will be required to work longer before retiring.

While Prime Minister Luc Frieden had signalled this change in his State of the Nation address in May, new information indicates the extension will be less significant than initially suggested. Minister of Social Security Martine Deprez provided these further details to the relevant parliamentary committee on Wednesday morning.

The core change: Lengthening actual careers

The official retirement age of 65 will remain unchanged. The reform's objective is to ensure that workers contribute for a period closer to that age, as a large majority currently retire well before 65.

The key change targets the conditions for early retirement. Currently, individuals can retire from age 60 if they have 480 months of contributions. These can be accrued through actual work or by "buying back" periods for activities like higher education or childcare.

From 2026, individuals who rely on these bought-back periods to reach the 480-month requirement will have to work longer. Minister Deprez clarified that the extension will be phased in gradually: starting with one additional month of work in 2026, increasing to two months in 2027, and rising each year to a maximum of eight additional months by 2030.

For example, someone aiming to retire in 2030 at age 60 who has reached the 480-month threshold only by including bought-back years would need to work an additional eight months.

To prevent anyone from being "negatively surprised", the new rule for working an extra month will only take effect from 1 July 2026. This accounts for the fact that pension applications can be submitted up to six months in advance.

All other announced changes are slated to apply from 1 January 2026. This timeline gives the Chamber of Deputies just under two months to pass the legal amendments, requiring a swift opinion from the Council of State.

Greater flexibility for the progressive pension

The reform also aims to introduce greater flexibility for other early retirement options, such as the progressive pension, modelling it on the existing progressive pre-pension scheme.

Minister Deprez provided specific details: with their employer's agreement, employees will be able to choose their own work-to-pension ratio. For instance, an individual could opt to work half-time and receive half of their pension. Other combinations, such as working three-quarters of the time while drawing a quarter of the pension, or vice-versa, will also be possible.

This model is contingent on employer approval. Additionally, employees must have worked at least 75% of a full-time schedule in the three years preceding their application – a contrast to the public sector, which currently requires 100% for the same period.

A crucial technical detail distinguishes this new system: participants do not officially retire and return to work. Instead, they remain under their employment contract. The "pension" payment is technically compensation for the reduced working hours. This structure means that anti-accumulation rules, which normally limit earnings from work after claiming a pension, do not apply.

University years continue to play a role

The changes also introduce more flexibility for crediting university years towards pension contributions.

Currently, only years of study between ages 18 and 27 can be counted. Under the new rules, the focus shifts to the duration of studies rather than a strict age limit. Any period of study from age 18 upwards – for a maximum of nine years in total – will be eligible for credit.

This means that someone who completes a bachelor's degree immediately but pursues a master's later, for example at age 28, will have those additional years of study recognised.

Pension system projected to be secure until 2042 with new measures

The committee discussion revealed differing projections on how much financial breathing room the proposed reforms would provide for the pension system.

Minister Deprez stated that the measures would secure the system's finances until 2042, representing a gain of four years. However, a senior ministry official accompanying her offered a more conservative estimate, suggesting the extended working hours would contribute two years of stability, with other measures adding one further year – a total gain of three years.

Despite this apparent discrepancy in the figures, the overall debate on the pension changes remained calm. Opposition members primarily sought clarification on the proposed reforms.

In a separate matter during the committee session, the results of the recent healthcare quadripartite meeting were discussed. Minister Deprez noted that the Association of Doctors and Dentists (AMMD) has not yet formally submitted its threatened termination of the agreement with the National Health Fund (CNS).