Two months after the Luxembourg government unveiled its pension reform, the Idea Foundation has issued a critical assessment, describing the plan as largely short-term and unfairly weighted against workers.

Presented in September, the reform is likened by the think tank to a "plaster on an open wound": a temporary fix that fails to address the deeper structural issues in the pension system.

In a detailed report published on Tuesday, the Idea Foundation, which is a think tank launched by the Chamber of Commerce in 2014, analysed the proposed changes currently being debated in Parliament and set to come into force on 1 January 2026.

The main measures include extending working careers by eight months from 2026, increasing social security contributions, which will reduce workers' net salaries, and offering incentives to delay early retirement. But the think tank warns that these steps will only marginally delay the financial strain: instead of the system running into deficit in 2026, the tipping point will be pushed to 2031. The pension reserve, the fund meant to safeguard the system, would still be depleted by 2044.

Muriel Bouchet, economist and author of the report, stated that the measures fall short of ensuring the pension system's medium-term financial sustainability. According to him, the current approach is only a temporary one, meaning another major reform will likely be required around 2030, after the next national elections.

The Idea Foundation is also sceptical that the government's incentives will convince large numbers of workers to delay early retirement, even with the promise of a tax rebate worth several thousand euros per year.

Bouchet further criticised the reform's imbalance: workers are expected to shoulder most of the burden, while pensioners are barely affected. The only concession asked of retirees is a lower adjustment of pensions compared to actual wage growth.

As an alternative, the think tank suggests gradually increasing the minimum pension by up to 5% by 2030 – about €108 gross, a move that would particularly benefit women and low-income retirees, including cross-border workers, according to Bouchet.

Another issue is the unequal treatment of public and private sector employees. The eight-month career extension will apply across the board, except for public servants in special schemes hired before 1 January 1999, an "asymmetry" the Idea Foundation views as favouring certain retirees.

Moreover, the end-of-year bonus, representing €1,004 gross for a full career, will be maintained. While this benefits those with lower pensions, the Idea Foundation argues that it lacks any form of social targeting: a retiree with a €2,000 monthly pension receives the same as one receiving €6,000. The think tank proposes making the bonus income-based, phasing it out entirely for pensions above €8,000.

RTL

Thousands of people had protested against government policy, and more specifically the pension reform, in June 2025. / © Archives RTL