Retirement in Luxembourg: how can you take advantage of the tax benefits under Article 111bis?

Planning for retirement means preparing for your financial future so you can fully enjoy this new stage of life. In Luxembourg, while the statutory pension provides an important foundation, it does not always allow you to maintain the same standard of living after you stop working. Between everyday expenses, leisure activities, and new projects, having additional income can make all the difference.

That is why building up personal retirement savings is essential. The Luxembourg system is based on three complementary pillars, the third of which offers tax benefits under Article 111bis of the Income Tax Act (LIR).

The three pillars of retirement in Luxembourg

The Luxembourg pension system is based on three pillars that complement one another to ensure greater financial security after retirement.

The first pillar is the statutory pension, paid by the Luxembourg social security system. It operates on a pay-as-you-go basis: contributions from working individuals help fund the pensions of retirees. The statutory retirement age is set at 65, with options for early retirement under certain conditions. The amount of the pension depends, in particular, on the length of contribution history and the earned income received throughout one’s career.

The second pillar consists of the supplemental pension offered by certain employers. This program allows employees to build up additional savings, generally funded by the company and sometimes supplemented by personal contributions. At Foyer, the “advantis” solution enables companies to offer their employees a supplemental pension plan. However, not all employees benefit from this type of benefit, which underscores the importance of individual savings.

Finally, the third pillar is based on personal retirement savings. Unlike the first two pillars, this is a voluntary approach that allows individuals to gradually set aside money to supplement their future income. These savings can take the form of a retirement savings plan, which benefits from a favorable tax framework in Luxembourg under Article 111bis of the Income Tax Law (LIR).

Why is it important to save for retirement?

Retirement is generally accompanied by a decrease in income, while many expenses remain: housing, food, healthcare, leisure activities, and travel. Building up supplemental savings therefore allows you to better prepare for this change and maintain a certain degree of financial freedom.

The earlier you start saving, the more you can spread the financial burden over time. For example, someone who saves €150 per month for 30 years will have contributed €54,000, excluding any returns and fees. If you start later, you’ll need to set aside larger monthly amounts to reach the same goal.

The key, therefore, is to adopt a strategy tailored to your budget and your plans, without necessarily waiting until you have a high income to start planning for your future.

What is a retirement savings contract under Article 111bis?

In Luxembourg, Article 111bis of the Income Tax Act governs retirement savings contracts. These contracts allow individuals to build up long-term savings intended to supplement the statutory pension, while enjoying tax benefits during the contribution period.

To qualify for this tax regime, the contract must meet certain conditions. In particular, it must be taken out before the age of 65, have a minimum term of 10 years, and provide for access to the savings between the ages of 60 and 75. Upon maturity, the policyholder can receive their savings as a lump sum, a life annuity, annual withdrawals, or a combination of these options.

Since these savings are intended for retirement, early withdrawals are generally limited to certain exceptional circumstances provided for by law. It is therefore important to choose a contribution amount that is consistent with one’s long-term financial capacity.

Article 111bis: what tax benefits took effect in 2026?

One of the main benefits of a retirement savings plan is the ability to deduct contributions from taxable income. As of January 1, 2026, the annual tax deduction limit has increased from €3,200 to €4,500 per person, or the equivalent of €375 per month.

For a married couple, each spouse can benefit from their own deduction limit, allowing for up to €9,000 in deductible contributions per year, subject to applicable tax rules.

In practical terms, a person who contributes €4,500 to a retirement savings plan can deduct this amount from their taxable income. If this deduction corresponds, for example, to a 30% tax savings rate, the individual could realize an estimated tax savings of €1,350. The actual amount saved, however, depends on the individual’s tax situation, particularly their income and tax bracket.

This benefit applies to Luxembourg residents, as well as certain cross-border workers who meet the conditions for tax equivalence. Contributions must be reported under “special expenses,” based on a tax certificate typically provided by the insurer.

You must also take into account the tax treatment applicable when you withdraw your savings. At maturity, the principal is taxed at half the standard rate under certain conditions, while 50% of life annuities are tax-exempt in Luxembourg. However, the tax treatment may vary depending on the beneficiary’s personal circumstances and country of residence.

How can you best prepare for retirement?

Proper preparation begins with estimating your future statutory pension to identify any gap between that amount and your desired retirement income. You can then determine a savings amount that fits your budget, age, and goals.

When choosing a retirement savings plan, you should also consider your investment horizon, your risk tolerance, and how you plan to access your savings. At Foyer, the “Horizon” plan, in particular, allows you to gradually build up your retirement savings through various investment vehicles, based on your profile and goals.

Plan for retirement today to enjoy tomorrow

Retirement in Luxembourg is based on three complementary pillars, but individual savings play a key role in maintaining your standard of living and making your plans a reality after you retire.

Thanks to Article 111bis of the Income Tax Code (LIR) and the new tax deduction limit of €4,500 in 2026, retirement savings plans offer an attractive way to plan for the future while taking advantage of tax benefits.

Starting to save today, even in small amounts, allows you to approach this new phase of life with greater peace of mind. A Foyer Lux-Assurances advisor can help you choose a solution tailored to your situation and goals.