By the age of 60, many think it’s too late to take out a supplementary pension insurance. However, it is still entirely possible — and often fiscally attractive — to do so. Luxembourg’s legislation allows you to take out a supplementary pension insurance up to the age of 65, as long as the contract has a minimum length of 10 years and ends before the age of 75. This solution, of which many are unaware, presents a genuine opportunity for people to enjoy tax benefits at the end of their career.
Why take out pension insurance after the age of 60?
Of course, the earlier you start, the greater the capital that builds up. But after the age of 60, the objective changes slightly. It’s no longer really about building up assets over the long term, it’s more about taking advantage of the immediate tax benefit while preparing for your retirement.
According to Article 111bis of Luxembourg’s income tax law (L.I.R.), contributions made in the context of a supplementary pension insurance are tax deductible up to €3,200 per year. In concrete terms, each contribution reduces your taxable income and consequently the amount of tax due.
A couple can therefore benefit from a cumulative deduction of €6,400 per year, provided that each of them takes out their own contract.
Estimate your annual tax savings with our pension tax simulator.
Exceptionally beneficial taxation upon retirement
The supplementary pension insurance offers an extremely favourable tax framework to Luxemburg residents when the pension is paid out.
- In the case of an annuity, only half of the amount is taxable, the other half is entirely exempt.
- If you choose a lump sum payment, this is subject to reduced taxation, which is calculated at half of the overall rate.
These rules allow you to maximise the income you actually receive and to significantly reduce the tax burden upon retirement.
The advantages of a supplementary pension insurance
Immediate tax benefits
Every contribution made directly reduces the taxable base. It’s a simple way to alleviate your tax burden while calmly preparing for your retirement.
Flexible and personalised savings
The policyholder remains free to choose the amount of their contributions, the duration of the contract (with a minimum of 10 years and a final maturity at no later than 75 years old) and the type of payout (payment in the form of a lump sum or a monthly annuity, or a mixture of the two).
A supplement to the statutory pension
The basic scheme, managed by the National Pension Insurance Fund (Caisse nationale d’assurance pension – CNAP), guarantees reliable cover, however this is often insufficient to maintain your former standard of living. The supplementary pension insurance therefore strengthens your financial security upon retirement.
Criteria for supplementary pension insurance
| Criteria | Detail |
|---|---|
| Subscription age | From 18 to 64 years |
| Minimum amount | €25 per month |
| Minimum duration | 10 years (end of contract before the age of 75) |
| Tax deduction (Art. 111bis L.I.R.) | Up to €3,200 per year and per taxpayer |
| Types of payment upon maturity | Lump sum, annuity or a combination of the two Tax benefits: Annuity: half is tax exempt, the other half is taxable as income Lump sum: taxable at half of the overall rate. |
| Target group | Employees, self-employed, liberal professions |
Make the right choice
Taking out easyLIFE Pension at the age of 60 means making a prudent and fiscally smart choice. Even on the brink of retirement, this solution allows you not only to lighten your tax burden each year, but also to build up additional income to maintain a comfortable standard of living.
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