The American Chamber of Commerce in Luxembourg (AMCHAM) recently published a set of recommendations concerning pension reform in the Grand Duchy.
On Tuesday 24 June 2025, Paul Schonenberg, Chairman and CEO of AMCHAM Luxembourg, highlighted both the strengths and shortcomings of the current pension system. He noted that under Luxembourg’s tier one government pension system, the primary pillar of the country’s pension framework, employees, employers and the government each contribute 8% of an employee’s salary into the social security system. After a minimum of ten years and up to forty years of contributions, individuals accrue a personal pension entitlement. While this system enables many to build retirement income over time, Schonenberg pointed out that two-thirds of retirees currently receive only partial pensions.
In comments provided to Chronicle.lu, Paul Schonenberg emphasised: “2/3rd of retirees in Luxembourg receive only partial pensions which means they receive insufficient pensions to live in dignity here in Luxembourg. Most of these are foreigners coming later in their working years to Luxembourg, or women who take career breaks to raise their children. Let’s help them by allowing them voluntarily to work beyond age 65, delay the start of their pensions and let them earn bigger pensions when they are ready to finally stop working!”
Schonenberg also addressed the current debate in Luxembourg’s Chamber of Deputies, noting that pension reform has become necessary due to mounting financial pressure on the system. “This self-funded program is running out of money with retirees taking more money out monthly as retirement pensions than currently employed workers are contributing into the system,” he explained. “With the pension fund suffering from negative cash flow, the government has no choice but to make adjustments to ensure long term solvency of the system.” Among the possible solutions, he identified a gradual increase in the retirement age, in line with trends in other European countries and the US, while acknowledging that such measures are often met with public resistance.
Schonenberg further outlined the positions of various interest groups involved in the pension reform debate. “The politicians are quite naturally not interested to alienate voters so there is little enthusiasm for raising the mandatory retirement age,” he observed. He added that certain women’s advocacy groups have called for higher benefits for women, citing that “average retirement pensions for men are 36% higher than for women.”
He also criticised the stance of the civil servants’ union, which, according to him, opposes increasing employee contributions or adjusting benefits. “They want to combine the pension reserves for the government employees, which is approaching insolvency, with the cash reserves for the private sector, which has a higher cash reserve balance,” Schonenberg said, warning that this could hasten insolvency for private sector pension funds.
Addressing the foreign community’s specific challenges, Schonenberg noted that many foreign professionals arrive in Luxembourg later in life after gaining qualifications and experience abroad. “Despite many of them having higher than average salaries, they reach the mandatory retirement age of 65 with less than 20 years of accrued pension benefit entitlement and insufficient pensions to live with dignity.” He added that such individuals are often unable to delay retirement or accrue additional pension rights beyond 65, even if they continue to contribute to the system. “Their only choice is to start retirement and ask for their pension contributions after age 65 to be reimbursed to them,” he explained.
As a constructive path forward, AMCHAM recommends allowing individuals to continue working and contributing to the state pension system beyond the age of 65 on a voluntary basis. Schonenberg argued that this flexibility would not only help address income gaps among late-arriving expats, women with career breaks and others with insufficient entitlements, but also boost the pension fund’s financial sustainability. “Allowing these people to remain employed and contributing voluntarily would improve their financial situation and support their emotional and physical well-being,” he concluded.
