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The Chamber of Commerce and the Chamber of Skilled Trades and Crafts issued a joint opinion this week on draft law no. 8634, which amends the Social Security Code and the Labor Code and aims to introduce a reform of the pension system. After thorough analysis and consultation with their members, the two professional chambers oppose the draft law, while reaffirming the urgent need for structural reform to guarantee the long-term sustainability of the pension system.
While both chambers understand the sustainability concerns that motivate the government initiative, they believe that the proposed measures, both in social security and labor law, are insufficient, inappropriate, or counterproductive in light of the structural challenges facing the pension system.
The eight-month extension of contribution periods by 2030 constitutes too marginal an adjustment to influence the actual retirement age, which is already one of the lowest in the OECD. This measure will only have a modest financial impact—and is therefore insufficient—to rebalance the system in the coming years.
Increasing the contribution rate to 25.5% immediately raises labor costs in a context of already weakened competitiveness, particularly for SMEs and sectors exposed to international competition. Furthermore, in the view of the two professional chambers, this increase offers no structural solution to the imbalance in the pension system, whose projections clearly demonstrate its unsustainability in the medium term. Finally, this measure sends a negative signal to businesses and workers, suggesting that addressing public imbalances primarily involves increasing contributions, to the detriment of the country’s attractiveness.
The increased flexibility of study periods, while motivated by the desire to promote lifelong learning, also runs counter to the objective of sustainability because it further increases the proportion of periods not covered by contributions. Furthermore, the two professional chambers believe that if the State wishes to maintain these benefits, their financing should come from its own budget and not from pension insurance, which is based on an insurance-based model.
The chambers ultimately oppose the introduction of a phased retirement scheme into the Labor Code, given that such a system is intrinsically linked to social security (pension branch) and that no added value has been demonstrated compared to phased early retirement and combining income with an early pension. Moreover, this mechanism would impose a disproportionate administrative and financial burden on employers by transferring to them the management and payment of compensation that ultimately falls under the social security system. Not to mention the practical arrangements under consideration, which also present risks of errors, legal uncertainty, and complexity for employees themselves, and even potential discrimination among them.
For both professional chambers, the conclusion is clear: the proposed measures will only marginally postpone the emergence of pension system deficits, and only a comprehensive, coherent, and structural reform will ensure the financial viability of the pension system, restore intergenerational equity, and preserve the competitiveness of the Luxembourg economy.