General points

End-of-year allowance

An end-of-year allowance is paid to people who are entitled to a pension on 1 December of the current year.

The gross allowance is equivalent to €1.67 at index 100, base year 1984, for each year of insurance completed or started, provided that the number of years taken into account does not exceed 40.

If the pension starts during the year, the allowance is calculated at the rate of one twelfth for each calendar month.

The amount of the allowance is not taken into account when applying the anti-overlapping provisions, but it is, where applicable, reduced in the same proportion as the pension components.
The end-of-year allowance is subject to social security and tax deductions. Contributions from members of the Chamber of Employees are deducted from the end-of-year allowance.

The law of 21 December 2012 reforming pension insurance provides that the end-of-year allowance will no longer be payable if the overall contribution rate exceeds 24%. The overall contribution rate is currently set at 24%, of which 8% is payable by the insured person, 8% by the employer and 8% by the State.

Dynamic adjustment of pensions

The law of 21 December 2012 on the reform of the pension insurance introduced a differentiation between the technique of "revaluation" of pensions which is used in the context of recording salaries and income in the career with the value of the year 1984 and during the initial calculation of the pension at the time of granting a pension and the technique of "readjustment" which is used to adjust pensions in progress to changes in salaries.

Revaluation when the pension is awarded

Pensions for which entitlement began before 1 January 2014 are multiplied by the revaluation factor for 2009, which is set at 1.405.

Pensions for which entitlement began after 31 December 2013 are multiplied by the revaluation factor for the fourth year prior to entitlement. Salary revaluation is applied at the time of granting when the pension is initially calculated and does not depend on the financial situation of the scheme.

Pension readjustments

Current pensions are readjusted to reflect living standards.

Every year, the government examines whether or not the readjustment moderator should be revised by legislative means. As soon as the pure distribution bonus (*) for the penultimate year preceding that of the revision exceeds the overall contribution rate, the government submits a report to the Chamber of Deputies accompanied, where appropriate, by a bill to redetermine the readjustment moderator. This moderating factor reduces the impact of the readjustment of pensions to the current standard of living and can have a value of 1, 0.5 or 0. If it is set at 1, then pensions are readjusted 100% to the standard of living, if it is set at 0.5 then the readjustment of pensions to the standard of living is reduced by half and if it is set at 0 then pensions are not readjusted for the year in question.

The index number applicable from 1 September 2023 is 944.43.

(*) The pure distribution bonus represents the ratio between annual current expenditure and the total wages, salaries and pensionable income on which the annual contribution income of the general pension scheme is based.

Global adjustment factor 2025 (revaluation factor and readjustment factor)

For pensions starting in 2025, the overall adjustment factor is 1.553.

Statutory deductions

In principle, the gross amount of pensions is converted to the net amount by making the following deductions.

Health insurance contributions

The gross pension of a beneficiary subject to Luxembourg health insurance is subject to deduction of 2.80%.

Tax

The taxable amount of the pension is subject to the pension tax provisions. Specific questions about tax withholding should be addressed to the Tax Administration.

A scale of tax deductions on pensions is published annually by ministerial decree. Taxes are calculated on the basis of the scale and according to the tax group applicable to the pension holder's situation. Taxation is carried out in accordance with the instructions (tax class, tax relief, etc.) issued by the tax authorities.

The contribution towards the cost of long-term care insurance

For pension holders subject to Luxembourg long-term care insurance, the rate of the long-term care contribution is set at 1.40% of the gross pension, reduced by a deduction of 25% of the minimum social wage.

Payment, suspension, statute of limitations

Pensions are paid monthly in advance. They cease to be paid at the end of the month in which the beneficiary dies or in which the eligibility criteria are no longer met.

If the employer pays a grace quarter following the death of an insured person in active employment, the survival pension is paid as compensation to the employer.

Payment may be subject to the presentation of a life certificate or death certificate for the spouse or partner.

Orphan pensions are paid to guardians until the children reach the age of majority.

Payment is validly made by means of a transfer to the beneficiary's postal or bank account.

Appeal procedures

All pension applications are followed by a presidential decision to award or reject.

In the event of disagreement, the person concerned may lodge a written objection to the presidential decision within 40 days of notification.

A decision will be made regarding the objection by the CNAP board of directors.

The decision of the board of directors may be appealed before the Social Security Arbitration Board. An appeal against the decision of the Social Security Arbitration Board may be lodged with the High Council for Social Security.