A government proposal to bridge the pension gap with new tax breaks was met with scepticism on Tuesday, as opposition MPs argued the plans fail to address inequality and the realities of physically demanding work.

On Tuesday, the Parliamentary Finance Committee reviewed two new incentives designed to narrow the gap between the legal and actual retirement ages. The measures aim to boost pension payouts for individuals who choose to work beyond the average retirement age.

Minister of Finance Gilles Roth, speaking after the committee meeting, stated the goal is to "voluntarily extend working careers" by providing fiscal support. Under the proposed scheme, individuals aged 57 or older with a 40-year career could receive a monthly tax deduction of €750, resulting in an annual net tax relief of approximately €3,700.

While the opposition welcomed the voluntary nature of the incentives, they raised several concerns, arguing that key questions remain unanswered.

MP Taina Bofferding of the Luxembourg Socialist Workers' Party (LSAP) voiced criticism that the measures are "not socially staggered enough." She argued that those with lower incomes would see limited future benefits. A further point of contention was the failure to account for physically strenuous professions. Bofferding noted that individuals who have performed such work for decades may be unable to extend their careers.

The LSAP MP also emphasised that companies must share responsibility in retaining older workers and questioned the measure's overall efficacy in securing the long-term future of the pension system.

Private supplementary pensions

A second measure involves a significant increase to the tax-deductible amount for private supplementary pensions, raising the limit from €1,300 to €4,500. This proposal was met with immediate criticism from opposition parties.

MP Sam Tanson of the Green Party (Déi Gréng) challenged the government's assertion that the measure strengthens the third pension pillar, arguing that no calculations have been done to show what benefits this would actually yield for someone contributing to this type of private pension scheme.

In response, Minister Roth stated that such calculations fall to individuals and their insurers. He defended the policy as socially just, contending that those with lower incomes would receive a higher net amount percentage-wise. For minimum wage earners, whose income is already tax-free, the benefit would be provided as a tax credit.

Despite these justifications, both the LSAP and the Green Party remain unconvinced. They maintain that the priority should be strengthening the public pension system to reduce inequality, rather than incentivising private schemes.