Chapter VI: Old-age

Luxembourg VI

Applicable statutory basis

Basic principles

Field of application

Exemptions from compulsory insurance

Conditions

Benefits

Adjustment

Partial pension

Accumulation with earnings

Taxation and social contributions

 

 

 

TopApplicable statutory basis

Book III of the Social Insurance Code (Code des assurances sociales), including the last amendments through the Law of 27 December 1996.

TopBasic principles

Insurance system.

TopField of application

Compulsory insurance for all persons engaged in a professional activity (employees and self-employed). A voluntary insurance is possible.

TopExemptions from compulsory insurance

Exemption from compulsory insurance is granted to persons who are only engaged occasionally and not customarily in a professional activity, when the period of activity is determined in advance. The period of activity should not exceed three months in each calendar year.

The insurance does not cover non salaried activities if the work income does not exceed one third of the minimum social wage.

TopConditions

1. Minimum period of membership

120 months of effective insurance.

If, at age 65, the insured does not fulfill the necessary condition of 120 months of insurance to obtain an old-age pension (pension de vieillesse), the contributions paid (except the portion paid by the State) are reimbursed.

2. Conditions for drawing full pension

40 years of insurance.

3. Legal retirement age

Standard pension

65 years.

Early pension

From 60 years of age, on condition that 480 months of effective insurance can be proved or additional reduced periods can be proved.

From 57 years of age, on condition that 480 months of effective insurance can be proved .

Deferred pension

The beginning of the old-age pension (pension de vieillesse) may be deferred until the age of 68.

TopBenefits

1. Determining factors

Contributions and length of insurance periods are taken into account.

2. Calculation method or pension formula

Comprises flat rate supplements (majorations forfaitaires) (depending on duration) of 1/40 per year of insurance (max. 40 years) and of proportional supplements (majorations proportionnelles) (which depend on the contribution effort).

Flat rate supplements (majoration forfaitaire): LUF 9,840 (EUR 244) per month for 40 years of insurance.

Proportional supplements (majoration proportionnelle): 1.78% of total earnings taken into account.

3 Reference earnings or calculation basis

The salary or the professional income are taken into account.

Minimum amount liable for contribution:

LUF 46,878 (EUR 1,162) per month.

Maximum amount liable for contribution:

LUF 234,392 (EUR 5,810) per month.

4. Noncontributory periods credited or taken into consideration

Periods for the rearing of children, education/training periods between the age of 18 and 27, periods during which a dependent was cared for, periods during which an invalidity pension is granted, periods exempted from payment of self-employment contributions, etc.

5. Supplement for dependants

Spouse

None.

Children

None.

6. Special supplements

None.

7. Minimum pension

No pension shall be less than 90% of the reference amount, if the insured has at least 40 years of insurance: therefore, there is a minimum of LUF 40,255 (EUR 998) per month. If the insured did not qualify as aforementioned, the minimum pension (pension minimale) is reduced by 1/40 for each missing year.

8. Maximum pension

No pension shall exceed 5/6 of five times the reference amount, that is LUF 186,366 (EUR 4,620) per month. Calculation is based on the rules of common law.

9. Early pension

Calculation is based on the common law.

10. Deferment

Supplement to the pension by an actuarial co-efficient applicable between the ages of 65 and 68 years.

TopAdjustment

Pensions automatically index-linked to price development whenever the index varies by 2.5% in relation to the preceding index.

Adjustment of pensions to level of wages by special law.

TopPartial pension

If salaried activity is exercised for which monthly earnings exceed one-third of the minimum social wage, the pension is automatically reduced by half.

TopAccumulation with earnings

Normal old-age pension (pension de vieillesse normale): accumulation possible without limit.

Early old-age pension (pension de vieillesse anticipée): accumulation is limited to earnings resulting from occasional or insignificant activity, i.e. earnings less than one third of the minimum social wage (monthly average during the calendar year).

TopTaxation and social contributions

1. Taxation of pension benefits

For tax purposes, social security benefits replacing income are treated as wages.

2. Limit of income for tax relief or tax reduction

The same special tax allowances for persons in gainful employment and pensioners respectively.

3. Social security contribu tions from pension

Contributions are deducted for heath care.