All employees and self-employed people in Luxembourg pay compulsory contributions to state funds for old age and invalidity pensions.
Contributions are 24 per cent of gross income (split three ways, between employee, employer and with the government contributing a portion). Pension cover is continued while you’re on unemployment or other forms of income-replacement benefit, the agency usually paying contributions on your behalf.
In order to claim an old age pension, you must have reached a certain age (normally 65) and have made contributions for a minimum period. Special conditions often apply to civil servants, miners, railway company employees and other groups. Under EU regulations, you must be given credit for contributions made to the state pension systems of other EU countries, and Luxembourg has social security treaties with some non-EU nations (e.g. the USA) that may allow you to receive full or partial credit for contributions made in those countries. Further information on EU pension regulations can be found in the ‘Dialogue with Citizens’ section of the EU website (click here ). Information on social security treaties with non-EU countries can be obtained from your embassy or consulate.
To be eligible for an old age pension in Luxembourg, you must have made contributions in Luxembourg or another EU country for at least 120 months. If at retirement age you haven’t made sufficient contributions, you don’t receive a pension; instead the contributions that you’ve made in Luxembourg are returned to you, excluding any employer contributions that have been made on your behalf. Normal retirement age is 65, although early retirement is permitted at 60 or 57 under certain circumstances, provided you’ve made pension contributions for a minimum of 480 months.
The standard pension is around 71 per cent of your average salary during the years you contributed, up to a maximum of €6,000 per month, with a minimum benefit (after 480 months of contributions) of around €890 per month. Payments are indexed annually for inflation and revised every second year in the light of salary trends. Employees of private companies must apply to the Caisse de Pensions des Employés privés in Luxembourg City a few months before reaching retirement age to allow time for processing the necessary paperwork and verifying any foreign contributions.
To qualify for an invalidity pension, you must have been insured (i.e. working in Luxembourg and making social security contributions) for at least 12 months during the three years immediately prior to your disability. This requirement may be waived if the disability is due to an accident or occupational illness.
No minimum degree of disability is required in order to receive a pension, the main criterion being that you’re unable to practise your normal occupation. Invalidity pension payments begin around six months after the injury or the onset of illness, when standard employer sickness benefit expires, and continue until there’s a significant improvement in your condition or you reach the age of 65, when you’re entitled to an old age pension. Anyone under the age of 50 who is receiving a disability pension must agree to undergo all recommended forms of rehabilitation. The amount of benefit paid is based on your previous income and is calculated in much the same way as for an old age pension, although there’s no minimum contribution period.
This article is an extract from Living and Working in Holland, Belgium & Luxembourg. Click here to get a copy now.