If you are moving to Luxembourg to live and work, you may be concerned about your retirement years and wondering how this will affect you as an expat living in a foreign country. You might be relived to know that Luxembourg has a great pension system that all self-employed people and employees pay contributions to for old age and disability pensions. While there are eligibility requirements that must be met in order to receive a pension, the requirements can easily be met by expats that are working for the specified eligibility period.
In order to be eligible to receive a pension, you need to have made contributions in Luxembourg or another European Union country for at least 120 months, or 10 years. If you reach retirement age and have not paid in the minimum months, you will not receive a pension. However, your contributions that you have made will be returned to you minus any employer contributions.
Contributions add up to 24 percent of your gross income. The contribution responsibility is split three ways between the employee, the employer and the government.
Like the United States, normal retirement age in Luxembourg is 65 years of age. Early retirement is permitted at age 60 or 57 provided you have made pension contributions for at least 480 months, or 40 years.
Remember that Luxembourg has reciprocal social security system agreements with some non European Union nations like the United States. This means that you will get full or partial credit for contributions made in your country if it is one that Luxembourg has a reciprocal agreement with. Your embassy or consulate can let you know if your country has a reciprocal agreement with Luxembourg in regards to the social security system.
When you start receiving your pension, you can expect it to be about 71 percent of what your average salary was during the years that you contributed. The maximum payout is 6,000 Euros per month, and the minimum benefit is 890 Euros per month. Also, payments are indexed annually so that they can be adjusted for inflation. And every second year the payments are revised to keep up with salary trends.
If you are an employee of a private company, you will need to apply to the Caisse de Pensions des Employés privés a month or two before you reach retirement age because paperwork will have to be processed and any foreign contributions will have to be validated and verified.
In order to qualify for disability pension, you will need to have been working and contributing to the social security system for at least 12 months in the previous 3 years before your disability. In the event of an illness or accident, this requirement can be waived.
There are no criteria to gauge your level of disability to qualify for payments. Instead, you must be able to prove that you are no longer able to work in your normal occupation. You can expect disability payments to begin 6 months after the injury or illness, which is when your employer benefit should expire. Your disability payment will continue until you get better or until you reach age 65. Once you reach 65 years of age, you will get the retirement benefits. The amount of your disability benefit is also tied to your previous salary except there is no minimum contribution period required.
