Calculation of the old-age pension

1. The reduction coefficient at index 100
Wages and salaries are reduced by calendar year to the cost-of-living index number 100 at 1 January 1984 by means of an index 100 reduction coefficient.
For each year, the coefficient is obtained by dividing 100 by the average index for that year.

Example:
For 1990 the average index is 461.61
The reduction coefficient at index 100 will therefore be: 100/461.61 = 0.21663
An annual salary of 14,500 euros in 1990 corresponds to
14,500 * 0.21663 = 3,141.14 euros expressed as a cost-of-living index number 100 (i.n. 100).

2. The revaluation factor
Wages and salaries increased or reduced by the cost-of-living index number 100 are adjusted to the standard of living in the base year used to calculate pensions. To this end, they are divided by the revaluation factor, which expresses the relationship between the average gross level of salaries in the base year and the average gross level of salaries in each calendar year.

Example:
For 1990 the revaluation factor is 1.103
An income of 3,141.14 euros (i.n. 100) corresponds to
3,141.14 / 1.103 = 2,847.82 euros compared with the base year.

A Grand-Ducal regulation sets the revaluation factors applicable to salaries, wages or income for the years up to 31 December 2011. Those for subsequent years are set annually by Grand-Ducal regulation before 31 December of the following year. (R. 26.12.2012)

3. The base year
The base year used for calculating pensions is 1984.

4. The reference amount
The annual reference amount at index number 100 and defined for the base year 1984 is equal to 2,085 euros.

The fixed increases correspond, after an insurance duration of 40 years of compulsory, continued, optional, retroactive purchase or additional insurance periods, to a respective percentage rate of the reference amount. The rate of fixed increases is determined according to the year in which pension entitlement begins.

The annual reference amount at index number 100 and defined for the base year 1984 is equal to 2,085 euros. Fixed increases are acquired by fortieths for each year of insurance completed or started, but the number of years may not exceed forty.

By establishing the principle of staggered rises in proportional increases according to the age and career of the pension holder, the law has introduced a measure that should encourage people to continue working.

The staggered proportional increases apply to insured persons who receive a pension after 1 March 2002.

The law of 21 December 2012 reforming the pension insurance scheme changes the conditions for granting proportional increases by requiring the sum of the insured person's age and insurance duration to exceed a given threshold, which increases annually. In 2014, the threshold for entitlement to staggered proportional increases is 93, rising to 100 in 2052. On the other hand, the rate of increase for proportional increases is gradually increased from 0.01% per additional year for a pension starting before 2013 up to 0.025% in 2052. The extension of an active career is equivalent to more than a doubling of the rate that applied under the old legislation.

For 2025, the rate of increase of 1.769% is increased by one additional unit of 0.015% per year of age and one additional unit of 0.015% per year of insurance. However, this rate may not exceed 2.05%.

In order to verify the minimum pension qualification period, not only compulsory, continued, optional and retroactive purchase of insurance periods are taken into account, but also additional periods.

In the specific case of calculating an old-age pension or early old-age pension, the difference between the theoretical calculation of a minimum pension and the total of the fixed and proportional increases is referred to as the supplement to minimum pension.