Pension reform in Luxembourg: What’s new in 2026
- Lux-Assurances
- Jan 6
- 4 min read
Retirement is a major concern for residents and cross-border workers in Luxembourg. In response to population ageing, increasing life expectancy and growing pressure on public finances, the Luxembourg pension system has entered a significant phase of transformation. A structural reform came into force on 1 January 2026, introducing notable changes to the retirement age, contribution rates and, above all, tax incentives for retirement savings.
Why a pension reform in Luxembourg?
The Luxembourg pension system is based on the principle of intergenerational solidarity: contributions paid by today’s workforce finance the pensions of current retirees. Long considered robust, this model is now facing profound demographic changes.
According to the authorities, without gradual adjustments, the system’s financial balance could be weakened in the medium to long term. The reform therefore aims to secure the pension scheme, encourage longer careers and strengthen the role of individual savings in retirement planning.
Early retirement: progressively stricter conditions
The statutory retirement age remains set at 65. However, access to early retirement will change from 2026 onwards in order to gradually bring the effective retirement age closer to the legal age.
From January 2026, eligibility for early retirement at age 60 will require a slightly longer contribution record. This extension will be phased in as follows:
+1 month in 2026
+2 months in 2027
+4 months in 2028
+6 months in 2029
+8 months in 2030
These changes are detailed by the National Pension Insurance Fund on its official website: https://cnap.public.lu/en/actualites/2026/informationsreforme202601.html
Insured persons who already meet the conditions for early retirement from the age of 57 are not affected by these changes.
Working after 65: more favourable taxation
The reform also introduces incentives for those who wish to continue working beyond the statutory retirement age. Income earned during this extended period of activity may benefit from an increased tax allowance of up to €9,000 per year.
This measure, presented in the Résumé des travaux du 10 octobre 2025 published by the Luxembourg government, aims to encourage a more gradual transition between professional life and retirement.
Higher tax ceiling for retirement savings
One of the most tangible changes introduced by the reform concerns individual retirement savings. From January 2026, the tax-deductible ceiling for old-age provision contracts (Article 111bis of the Income Tax Law) will increase from €3,200 to €4,500 per year per taxpayer.
This significant increase enhances the attractiveness of private retirement savings solutions as a complement to the statutory pension. It allows households to reduce their current tax burden while building capital to maintain their standard of living in retirement.
Example of tax impact
A single Luxembourg resident subject to a marginal tax rate of 35% contributes €4,500 per year to an old-age provision contract from 2026 onwards. This contribution reduces taxable income by €4,500, generating an annual tax saving of €1,575.
Over ten years, this represents €15,750 in tax savings, excluding any potential investment returns. For a couple, the tax benefit can be doubled.
Increase in pension contributions
From 2026, the overall pension contribution rate will rise from 24% to 25.5%, in line with the budgetary documents submitted to the Chamber of Deputies (notably the draft law referenced in the October 2025 government filing).
This additional effort is shared equally between employees, employers and the State. Support mechanisms are planned for self-employed workers and lower-income households in order to limit the impact of this increase.
Implementation timetable
Submission of the draft law: autumn 2025
Main entry into force: 1 January 2026
Gradual implementation of certain measures (early retirement): from 1 July 2026
This timetable leaves little time to adapt, highlighting the importance of forward planning.
Key steps for a smooth transition
The 2026 pension reform encourages everyone to review their retirement strategy based on their personal situation. Anticipation not only helps to secure pension rights but also makes it possible to take advantage of new opportunities created by the revised tax and regulatory framework.
A retirement review is a key step to verify contribution periods with the National Pension Insurance Fund, assess the impact of the reform on the retirement date and estimate future pension benefits.
Make use of the higher tax-deductible ceiling to strengthen individual retirement savings, particularly through retirement savings plans.
Consider continuing professional activity beyond the statutory retirement age to benefit, where appropriate, from a more favourable tax framework and a gradual transition into retirement.
Anticipate administrative formalities by reviewing your pension file and gathering the necessary supporting documents.
The increase in the tax-deductible ceiling for old-age provision also offers a valuable lever to enhance retirement income while optimising taxation. For some insured persons, voluntarily extending their professional activity beyond age 65 may also prove beneficial, allowing access to specific tax advantages and a smoother transition to retirement.
Adjust your retirement strategy today
Wondering how the reform will affect your personal situation? Your Foyer Lux-Assurances advisor supports you with personalised advice, tax optimisation solutions, tailored simulations and continuous monitoring of legislative developments, helping you adjust your retirement plan with confidence.
The 2026 pension reform aims to secure the system over the long term while opening up genuine opportunities for individual optimisation, particularly through the increase in the tax ceiling for supplementary retirement savings. Good anticipation is therefore key to preserving your standard of living after your working life.
Three key points to remember
The tax-deductible ceiling increases to €4,500 per year from 2026.
Conditions for early retirement are gradually tightened, while the statutory retirement age remains 65.
The overall pension contribution rate rises from 24% to 25.5%, with targeted support measures.