Planning for Retirement in Luxembourg: PER and Retirement Savings

Retirement may seem a long way off when you’re just starting your career or have recently moved to Luxembourg. However, the earlier you start saving, the easier it is to build up additional income to maintain your standard of living after you stop working.

Luxembourg has one of the most robust retirement systems in Europe. However, as in many countries, the statutory pension does not always allow you to maintain the same level of income as during your working life. This is even more true for people who have had an international career, worked in several countries, or experienced periods of unemployment.

The Retirement Savings Plan (PER), also known as individual retirement savings, is one of the solutions that allows individuals to prepare for retirement while enjoying tax benefits during their working lives.

Why start planning for retirement today?

Life expectancy continues to rise in Europe. Someone retiring at age 65 can now expect to live for several more decades. This trend means having sufficient resources to finance this period of life comfortably.

Planning for retirement isn’t just about anticipating a drop in income. It’s also about maintaining your quality of life, funding future plans, keeping pace with inflation, and preserving a certain degree of financial independence.

For expatriates and cross-border workers, the issue is often more complex. A career spanning multiple countries can result in pension entitlements under different systems. It therefore becomes essential to supplement these systems with a personal savings strategy.

The longer the investment horizon, the more the effect of compounding works in the saver’s favor. That is why many experts recommend starting to plan for retirement as early as possible, even with modest amounts.

Understanding the Three Pillars of the Luxembourg Pension System

Retirement planning in Luxembourg is based on three complementary levels.

• The first pillar consists of the statutory pension paid by Luxembourg’s mandatory pension system.
• The second pillar consists of supplemental pensions set up by certain companies for their employees.
• The third pillar consists of individual retirement savings set up on a personal basis.

The PER falls under this third pillar. It supplements the income from the first two pillars to further secure your standard of living in retirement.

To understand in detail how the Luxembourg system works, consult our comprehensive guide to the three pillars of retirement in Luxembourg.

What is a Retirement Savings Plan (PER)?

The Retirement Savings Plan is a long-term savings product that allows you to gradually build up capital or supplemental income for retirement.

In practice, you make regular or one-time contributions to a financial institution or insurance company. The funds you contribute are then invested according to the risk profile you choose.

The goal is to have, upon retirement, additional capital to supplement your statutory pension and, if applicable, a supplemental corporate pension.

The PER also offers significant tax advantages, as contributions made may be tax-deductible within certain limits set by Luxembourg law.

This solution is particularly attractive for individuals who wish to take control of their financial planning for retirement, whether they are residents, cross-border workers, or expatriates in Luxembourg.

PER or Life Insurance: Which Should You Choose?

The PER and life insurance are often presented as competing solutions. In reality, these two products serve different purposes and can perfectly complement one another.

• The PER is primarily intended to help you prepare for retirement and take advantage of specific tax benefits.
• Life insurance offers greater flexibility for building long-term savings, planning for the transfer of assets, or financing various life goals.

In fact, many savers choose to combine both solutions to diversify their wealth management strategy and take advantage of the unique benefits of each product.

To better understand the specifics of this solution, consult our guide on Luxembourg life insurance.

What if your employer already offers a supplemental pension plan?

Before setting up a PER, it’s a good idea to check whether your employer has already established a supplemental pension plan.

These plans, known as the Pension Complémentaire d’Entreprise (PCE), form the second pillar of Luxembourg’s pension system.

They supplement the statutory pension through contributions funded entirely or partially by the employer.

The PER then complements this plan to further strengthen your financial preparation for retirement.

Learn how these plans work in our guide to the Supplementary Company Pension (PCE).

How do you track your PER over time?

Opening a PER account is the starting point of a long-term strategy. It’s important to regularly monitor the progress of your account to ensure it remains aligned with your goals.

In particular, it is recommended that you:

• regularly check the performance of your investment funds;
• adjust your contribution amounts based on changes in your income;
• reassess your risk profile every few years;
• gradually increase your savings contributions when your circumstances allow;
• gradually reduce your risk level as you approach retirement.

Preparing for retirement is a long-term process spanning several decades. Periodic reviews help optimize long-term results.

To take your retirement planning a step further

• Understand Luxembourg’s three-pillar retirement system
• Learn all about the Supplementary Company Pension (2nd pillar)
• Luxembourg life insurance and expatriation
• Maximizing your tax deductions in Luxembourg
• Discover the retirement and savings solutions offered by Foyer
• Discover the savings and retirement planning solutions offered by Raiffeisen Bank

Planning for Retirement: A Process to Start as Early as Possible

Retirement planning begins well before the end of your professional career. The earlier you start saving, the easier it is to reach your goals while keeping your financial commitment reasonable.

The PER is one of the tools that can help supplement income from the statutory pension and, if applicable, a supplemental corporate pension. Combined with a tailored wealth management strategy and a solid understanding of existing programs, it can help secure your financial future for the long term.

Whether you’re a resident, cross-border worker, or expatriate in Luxembourg, taking the time to think about your retirement today remains one of the best long-term financial decisions you can make.

FAQ: Retirement Savings Plan in Luxembourg

At what age should you start planning for retirement?

As early as possible. The longer the investment horizon, the more modest the contributions needed to reach a given goal can be.

Is the PER reserved for Luxembourg residents?

No. Depending on their tax and employment status, some cross-border workers may also be eligible for retirement savings solutions in Luxembourg.

Can I combine a PER with a Supplementary Company Pension?

Yes. The two plans are complementary and correspond to the second and third pillars of retirement, respectively.

What is the main advantage of the PER?

The PER allows you to plan for retirement while enjoying a tax benefit and gradually building up supplemental income for the future.

Can I adjust my contributions during the term of the contract?

Most plans allow you to adjust the amount of your contributions based on changes in your personal and financial situation.

What happens in the event of death before retirement?

Contracts generally provide for the designation of beneficiaries who will receive the accumulated funds in accordance with the terms of the contract.

Should you choose a conservative or aggressive investment profile?

It all depends on your age, your investment horizon, and your risk tolerance. Your choice may change over time.

PER or life insurance: which is the best option?

These two products serve different purposes. In many cases, they can be used in tandem as part of an overall wealth management strategy.