Think of the Luxembourg retirement system like a three-storey house (or 3 pillars):

• Ground Floor (1^st pillar): the basic legal pension, paid by the State
• First Floor (2^nd pillar): the supplementary pension scheme set up by the company (the subject that interests us today)
• Top Floor (3^rd pillar): personal private pension savings

This isn't your typical savings account. It's a specialised pension pot set up by your employer, exclusively designed for your retirement, where:

• Your employer regularly contributes (called employer allocations)
• You can top up with your own personal contributions
• Both you and your employer get some rather attractive tax benefits

But here's the clever bit – it's not just about retirement. This scheme can also cover death and disability, providing comprehensive financial protection for you and your family.

Let's get real. In Luxembourg, retirees typically receive more than double what was contributed for them during their working life. Generous? Absolutely. Sustainable long-term? That's the million-euro question.

The writing's on the wall: you need to start building your own complementary savings now. This is where the company pension plan comes into play. However, to benefit from it, your employer must have implemented this system in your company. Currently, only 2,200 Luxembourg companies offer this scheme, covering around 70,000 employees. For a country at the forefront of social innovation, that's surprisingly low. It's an opportunity that is still too rarely seized!

If your company hasn't jumped on this bandwagon, here's a heads up: it's increasingly seen as a top-tier employee benefit for attracting and retaining talent.

Suppose your employer decides to give you a raise. Here's what happens:

• They grant you a gross increase of €100
• They must additionally pay €13 in social contributions
• Total employer costs: €113 €

But here’s the catch:

• Social contributions eat into your raise
• Taxes take another chunk
• You're left with a measly net €62 in your pocket

Same €113 budget, but different approach:

• €94 goes directly into your pension plan
• €19 paid in flat-rate tax (20%)
• Total employer costs: still €113

The game changing differences?

• You get the full €94 in your pension pot
• This money grows for your retirement
• You do not pay tax on this amount now
• At retirement, you will only pay a small 1.4% contribution (the dependency contribution)

Apart from these employer allocations, you can yourself increase the annual amount. Being able to save up to €1,200 per year (that's €100 per month) with significant tax advantages - sounds nice, right? These personal contributions are directly deducted from your salary, without income tax. Even better: at the end, your capital will be exempt from income tax in Luxembourg. Only the 1.4% dependency contribution applies.

Meet Melanie. Assuming a 35% income tax rate:

• She pays €100 per month into her supplementary pension scheme
• Over the year, this represents €1,200 in savings
• She saves €420 in taxes (35% of €1,200)
• In the end, her savings of €1,200 only cost her net €780 net

Good news: self-employed residents are not forgotten! The Supplementary Pension Scheme for Self-Employed (RCPi) allows you to prepare for your retirement and choose to cover death, disability, and accident risks with tax advantages similar to those for employees.

With lalux-Safe Future, it's simple:

• You can pay up to 20% of your annual net income
• Your invested premiums are tax-deductible
• You only pay 20.9% flat-rate tax on contributions (non deductible)
• At retirement, the benefits paid are free of income tax, with only the 1.4% dependency contribution applying