Martine Deprez is the Minister of Health and Social Security in Luxemburg.
Her full biography can be consulted here.
Minister Deprez, please introduce yourself to our audience of first and second-language English-speaking employees and business owners.
My name is Martine Deprez and since the 17th of November 2023 I’m in charge of the Ministry of Health and Social security in Luxemburg. I was not a candidate in the elections of October the 8th 2023 and was rather surprised that Prime Minister Luc Frieden asked me to join the Government. My background fitted the task: Member of the CSV since 1986, I finished my mathematics studies in 1992. The same year in October I started my professional life at the actuarial service of IGSS before changing for the educational sector as a math teacher in January 2002. In 2011 my party asked me to join the State Council (Conseil d’État) to succeed my former Director of IGSS, Georges Schroeder. For 12 years, in addition to giving lessons in mathematics at high school in Esch, I collaborated as Counsellor on the legislative advice in the domain of health and social security.
What are the objectives of the current similarities and differences between the Luxembourg old age pension system?
Please explain the logic and objectives which have been the driving reasons for the creation of the current Luxembourg public sector pension for government employees and the current private sector pension systems. Please also explain the reasons which justify the differences between these two Luxembourg public (for civil servants) and private (for employees working in the private sector).
This evolution has historical roots. The development of social security in Luxembourg occurred in stages. On one hand, it progressed by socio-professional categories; on the other hand, it advanced by branches of risk.
Since their creation at the beginning of the 20th century, social insurance schemes have been mainly limited to salaried workers, except for accident insurance, which also covered farmers. The laws of July 31, 1901, April 5, 1902 and May 6, 1911 successively introduced compulsory health, accident and pension insurance for workers, as well as for private employees whose income did not exceed a certain ceiling. The various branches were then brought together in the Social Insurance Code by the law of December 17, 1925.
Gradually, social protection was extended to the entire working population. The law of January 29, 1931 introduced general pension insurance for private-sector employees. After the Second World War, the law of August 29, 1951 created compulsory general health insurance for civil servants and salaried employees. Among the self-employed, artisans were the first to benefit from a pension insurance scheme, introduced by the law of May 21, 1951. This socio-professional category, as well as shopkeepers and industrialists, have been insured against illness since the law of July 29, 1957. A pension fund for shopkeepers and industrialists was created by the law of January 22, 1960.
In the agricultural sector, the laws of September 3, 1956 and March 13, 1962 created a pension fund and an agricultural sickness fund respectively.
The law of May 23, 1964 regulates the health and pension insurance of self-employed intellectual workers, bringing them into line with the schemes applicable to private employees.
The law of May 23, 1964 regulates health and pension insurance for self-employed intellectual workers, bringing them into line with the schemes applicable to private employees.
The law of July 27, 1987 created a common law for all socio-professional categories in the private sector. Civil servants and employees in the public sector (State, communes, public establishments, CFL) benefit from a statutory pension scheme. Since January 1, 1999, these statutory schemes have been aligned with the general scheme.
The law of May 13, 2008, introducing a single status (effective January 1, 2009), put an end to the distinction between the socio-professional categories of private employees and blue-collar workers in terms of social security and labor law. More specifically, in terms of social security, the single status has led to the generalization of continued remuneration in the event of illness, and the merger of private-sector sickness funds and pension funds.
Please explain the current status and issues impacting the long-term solvency of this system:
The 2023-2028 coalition agreement of the government states that “the latest technical assessment of the pension insurance scheme dated April 26, 2022, revealed that the current contribution rate of 24% (3×8%) will be insufficient to cover the volume of annual pensions starting from 2027.”
It further provides that “[a] broad consultation will be organized with civil society regarding the long-term sustainability of our pension system, in order to reach a consensus on this matter.”
In 2024, two essential documents were published: the opinion of the Economic and Social Council dated July 17, 2024, prepared at the request of the government made in July 2022, and Statistical Bulletin No. 18 of the General Inspectorate of Social Security dated July 12, 2024, updating the projections made in the framework of the latest technical assessment.
The key figures remain unchanged: during the next coverage period, expenditures will exceed revenues, causing the system to start running a deficit.
This deficit stems, on the one hand, from the retirement of a significant number of insured individuals who began their professional careers in Luxembourg around 1990. At that time, national employment experienced sustained high growth over several years, and these cohorts of insured individuals are set to benefit from their pensions around 2030. Since current employment growth is around 1%, the increase in the number of contributing insured individuals is smaller than the increase in the number of pensioners.
The last changes to the general scheme date back to 2012. These changes are already factored into recent projections, but it is clear that they do not prevent the financial difficulties ahead. Hence, the necessity to review the state of the system and consult all stakeholders and the public on potential adaptation measures to consider.
Please explain to our target audience of international business people employees the similarities and differences between the public sector and private sector pension systems:
Since 1999 there is no difference anymore between the general pension scheme for private-sector employees and the statutory pension schemes for civil servants, municipal employees, and CFL staff except the contribution ceiling.
In the general scheme, contributions are capped at five times the minimum wage, which also limits the maximum pension that can be earned. In contrast, the public sector scheme has no contribution ceiling, enabling both higher contributions and the possibility of receiving a higher pension. However, private sector employees can enhance their pensions through coverage under the second pillar of the pension system, which refers to pension schemes established by a company or sponsor as part of their professional activities.
What are the current status, strengths and weaknesses of the public and private sector pension systems?
Current status for the general pension scheme:
In 2023, contributions exceeded the amount paid out in pensions to retirees, resulting in the reserves of the Joint Compensation Fund for the Pension Scheme (FDC) reaching €27.39 billion by the end of the year.
Strengths of the Luxembourgish pension scheme:
Luxembourg offers relatively high pensions compared to other countries, ensures a minimum pension and benefits from the substantial reserves of the Joint Compensation Fund (FDC).
Weaknesses of the Luxembourgish pension scheme:
The system is heavily dependent on employment growth. However, projections indicate that the employment rate will not increase at the same pace as the number of retirees, leading to a financial imbalance. As a result, the pension promise cannot be kept in the future unless we act now.
What changes are you considering?
No fixed changes are yet to be announced. In October a wide-ranging participatory consultation on the long-term viability of the system was launched to gather the opinions of the stakeholders and the civil society, to reach a consensus on the state of the system and on any possible adjustments to be made.
How can the expat community get involved to ensure their wishes and needs are addressed?
In the same way as for residents, via our platform pensioun.schwätzmat.lu
Throughout October and November, civil society had the opportunity to share its views on the current pension system via the dedicated www.pensioun.schwätzmat.lu platform, and to put forward suggestions on how a sustainable pension system should look in the future.
It is planned that at the beginning of 2025, the general public will have another opportunity to express its views. I invite everyone to visit the website and take part in the discussions.
When the original pension law was first written there were only a limited number of foreigners working in the country yet the law did not mandate a stop date for contributing into the pension scheme. Now with over 50% of private sector employees being foreigners, the law has been changed refusing worker contributions to the old age pension system beyond the age of 65. This appears to discriminate against foreigners the majority of whom have less years of pension contributions here in Luxembourg because of their late arrival into the Luxembourg workforce as compared to their Luxembourg counterparts. Will you consider changing the law to allow these employees who have much lower pension entitlements to voluntarily delay their start of pension and continue to pay into the system to ensure they can retire with dignity?
The Luxembourg pension system makes no distinction between locals and foreigners. The statutory retirement age is 65 and contributions can only continue to be paid if the conditions for drawing a pension have not yet been met.
Regulation (EC) No 887/2004 stipulates that all periods of insurance within the EU are taken into account for entitlement to a pension. In addition, Luxembourg has signed social security agreements with 39 countries which provide for the aggregation of periods for pension entitlement. Foreigners, who worked abroad before coming to Luxembourg, also receive a pension from their previous employment.
However the topic of contributing beyond the age of 65 will be assessed during the ongoing discussions about the pension scheme.
