This new input could significantly influence the ongoing debate over pension reform. On Wednesday 4 June, the European Commission released a set of country-specific recommendations for Luxembourg.
In the document, which covers housing, healthcare, and education, the EU executive draws attention in particular to the pension system, highlighting concerns about its “sustainability” over the medium and long term. It flags a striking paradox: Luxembourg currently holds “the largest pension reserve in Europe” – estimated at €27 billion – yet projections indicate that this reserve could be entirely depleted within the next 20 years.
The Commission, led by Ursula von der Leyen, also criticised the low employment rate among older workers, noting that only 51% of people aged 55 to 64 are in employment. It further questioned the early retirement age of 57, which comes with what it described as overly generous financial incentives to leave the workforce early. The Commission has a history of taking issue with Luxembourg’s retirement system, as it had previously proposed to push the retirement age as far as 72.
The European Commission’s view appears to support the approach proposed by PM Luc Frieden, who has floated the idea of extending career lengths and delaying early retirement by increasing the number of mandatory contribution years.
According to the Commission, Luxembourg must take concrete steps to address the long-term sustainability of its pension system. This includes reducing the availability of early retirement options and boosting employment among older workers by improving their access to suitable job opportunities.
Whether this support will provide the government with the necessary leverage to move forward in a still-uncertain reform process remains to be seen.
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