The new pension reform in Luxembourg: key measures and impacts explained in a video

The pension reform came into effect in January 2026. It brings adjustments. But the real question is simple: does it make the system sustainable in the long term?

Luxembourg has one of the most generous pension systems in Europe. Over the course of a retirement, the system pays out approximately twice what was contributed for each pensioner. And this worked for decades because the active population was growing rapidly and continuously. Today's model relies on growth close to 3% per year, meaning a doubling of contributors every 24 years.

But this growth is from the past. Today, demographics are changing and growth is no longer sufficient to finance this model. Before the reform, starting in 2026, contributions were no longer enough to pay pensions and reserves began to be used. Today, approximately 2.2 workers finance one pensioner. By 2040, this ratio drops to 1.6. This is neither opinion nor ideology. It's mathematics. A system that consistently spends more than it collects will always become unbalanced.

Let's now look at the main measures of the reform, and the quantified impacts, over a six-year period.

First measure:

Contributions are increasing. The rate goes from 24% to 25.5%. Over six years, this brings in approximately 3.6 billion euros to the pension fund. But for the State, which finances one third, this also represents a budgetary cost close to 2 billion euros.

Second measure:

Early retirement departures are slightly delayed. By a few months per year, up to eight additional months from 2030 onwards. Estimated effect over six years: approximately 1 billion euros in savings.

Third measure:

For current pensioners, the correction mechanisms provided by the 2012 reform are put on hold. The pension adjustment brake and the automatic eliminationof the end-of year allowance are postponed. Estimated cost over six years: approximately 2.5 billion euros.

In the end, a large part of the effort from today's workers serves to maintain the benefits of current pensioners, by postponing remedial measures. The result is clear: the depletion of reserves is only postponed by four years. We're buying time. But the structural imbalance remains entirely. One thing is therefore certain: more reforms will have to come.

In the meantime, an important message: The longer reform is postponed, the more essential it becomes that everyone anticipates their retirement, with clear eyes, and without waiting for the problem to resolve itself.