Claudia Halmes-Coumont, Director LALUX Assurances-Vie
Luxembourg’s 2025 Pension Reform: A balancing act, not a long-term solution
An expert interview on what the reform means for professionals, expats, and managers in Luxembourg
One year after launching the debate on pension system sustainability, Luxembourg has introduced its 2025 pension reform proposal. Claudia Halmes-Coumont, Director of LALUX Assurances-Vie and pension expert, explains what this means for businesses and individuals alike, and how Luxembourg’s system compares to neighbouring European countries.
Founded in 1920, LALUX was the first Luxembourg insurance company active in the Grand Duchy and remains one of the market leaders today. The Group employs approximately 500 people in Luxembourg and works with over 700 insurance agents. LALUX distinguishes itself through locally based, financially stable ownership, independent of major international groups. LALUX-Vie is the leading life insurer in Luxembourg and covers nearly 40% of the local market for supplementary pension schemes for companies, with more than 40 000 employees from some 2,000 corporate clients benefiting from their comprehensive coverage. The company regularly ranks first in customer satisfaction and loyalty surveys, reflecting its commitment to serving Luxembourg’s diverse professional and residential community with empathy, integrity, and proximity.
Claudia Halmes-Coumont serves as Directeur of LALUX Assurances-Vie, where she oversees the company’s life insurance and pension operations. She is a recognized expert on Luxembourg’s pension system and has been vocal about the need for reform to ensure long-term sustainability. Claudia Halmes-Coumont has spoken at numerous professional events on pension security and supplementary pension schemes. Her expertise combines deep knowledge of Luxembourg’s pension pillars with practical insights into how professionals and private persons can effectively prepare for retirement in the Grand Duchy.
Luxembourg’s pension system is often described as generous. How does it actually compare to neighbouring countries?
Luxembourg indeed maintains one of Europe’s most generous pension systems. The average replacement rate – the percentage of your career average salary that your pension represents – stands at approximately 75%. To put this in perspective, in neighbouring countries this percentage varies between 40% and 58%. This generosity reflects Luxembourg’s economic strength and its commitment to social solidarity, but it also explains why reform has become necessary as demographic pressures mount.
What’s driving the need for reform? The system seems financially stable.
The system is currently stable, but the trajectory is clear. Starting in 2026, contributions from active workers will no longer fully cover pension payments, requiring withdrawals from the general reserve fund. Current projections suggest these reserves could be depleted around 2044 without adjustments. This isn’t a crisis, but it’s a wake-up call. The core challenge is demographic: we have an aging population and slower growth in the number of contributors. The proposed 2025 reform aims to extend the system’s viability without fundamentally changing its structure.
What are the main changes introduced by the reform?
The reform includes several key measures. First, the contribution rate increases from 24% to 25.5%, shared among employees, employers, and the state. Second, to encourage individuals to take more responsibility for their retirement planning, the tax-deductible ceiling for third-pillar private pension savings would increase from €3,200 to €4,500 per year per taxpayer. Third, a progressive retirement option allows workers to reduce hours from age 60 while beginning to draw partial pension benefits. Fourth, workers who qualify for early retirement but choose to continue working can benefit from a monthly tax allowance of €750. Fifth, the reform broadens recognition of study years, which particularly benefits those with longer educational backgrounds—relevant for many managers and professionals. Finally, workers would need to work longer to qualify for early retirement – up to 8 additional months starting in 2030.
How significant is the impact? Does this truly solve the long-term challenge?
Honestly, no. These adjustments primarily buy time—extending reserve fund viability by approximately four years. The fundamental equation remains challenging: the ratio between contribution years and pension payment years will continue to be difficult to sustain without further adaptations. That’s why this reform should be viewed as one step in an ongoing process, not a definitive solution.
What does this mean for expats and international professionals working in Luxembourg?
This is particularly relevant for anyone building a career here. Luxembourg’s system accounts for international careers through EU coordination rules. However, the reform’s emphasis on individual responsibility is a signal that professionals —especially those accustomed to different systems — should take a more active role in retirement planning. The message is clear: the public system alone may not provide the retirement lifestyle you’re planning for.
You mentioned individual responsibility. What specific opportunities does the reform create?
The reform significantly increases the tax-deductible ceiling for the third pillar—private pension savings—from €3,200 to €4,500 per year per taxpayer. For a married couple, that’s €9,000 annually that can be invested while reducing taxable income. This is not a sales pitch; it’s simply recognizing that tax-advantaged retirement saving has become more attractive. This represents a concrete tool for supplementing future public pension income.
However, it’s worth noting that many professionals overlook another valuable option: the second pillar, or employer-financed supplementary pension schemes. If your employer offers such a plan, you can contribute up to €1,200 per year with a direct tax advantage —separate from and in addition to the third pillar limit. This second pillar remains significantly underused in Luxembourg, despite offering attractive tax advantages for employers and employees alike. For those building comprehensive retirement security, combining both pillars can be particularly effective.
What’s your key takeaway for AMCHAM members?
The 2025 reform, pending parliamentary approval, would maintain Luxembourg’s strong social model while acknowledging financial realities. It’s neither a radical overhaul nor a complete solution. For professionals and business leaders, the implication is straightforward: retirement security increasingly requires a diversified approach combining public pensions, private savings, and potentially employer-financed plans. The reform provides tools and incentives, but the responsibility for using them effectively rests with individuals. The question isn’t whether to supplement your public pension, but when to start. Given the demographic pressures and the limited scope of current measures, beginning private pension planning now isn’t optional—it’s essential for securing the retirement you envision.
Disclaimer: The views and opinions expressed are those of the authors and do not necessarily reflect an official policy or position of AmCham.lu. Any content provided by our interviewees are of their opinion, and are presented in their own words.