Don’t confuse taking an early old-age pension with early retirement

The statutory retirement age in Luxembourg is 65. But there are situations when you may be eligible for the old-age pension before this. Who does this apply to and what conditions must be met? myLIFE has the answers to help you tell the difference between an early old-age pension and early retirement.

Franck is 56 years old and has spent the whole of his working life in Luxembourg. He knows he still has a few more years to go before he will be eligible for an old-age pension. But that needn’t stop him gathering information on his eligibility and finding out what steps he needs to take, spurred on by the knowledge that his friend Tony is 61 and is taking early retirement, and his 60 year-old neighbour Elisa receives an early old-age pension. How come both have access to benefits before the statutory retirement age and what are the differences in status between the two?

What are the eligibility criteria for an old-age pension in Luxembourg?

First a reminder of the basics of retirement in Luxembourg. To be eligible for an old-age pension, you must be 65 years old and have at least 120 qualifying months (i.e. months of insurance contributions, whether mandatory, continued, voluntary or retroactive purchases*), of which 12 must be in Luxembourg.

In other words, Franck must have worked at least one year in Luxembourg and have a career spanning at least 10 years in total (in Luxembourg, another EU country, or a country with which a bilateral agreement is in place).

If he had also been employed abroad, for example in Belgium, he would receive a pension from both countries, proportionally to the years worked in each and based on the respective conditions regarding age and contribution period.

Useful info: If you do not meet the qualifying period condition, it is possible to request the reimbursement of any contributions paid from the pension office.

Franck meets the eligibility requirements for a pension from the age of 65, but is he eligible for a pension before this age like his friends?

An old-age pension is not granted automatically at the age of 65 or earlier. A request must be submitted a few months before you are eligible.

How to qualify for an early old-age pension

Let’s have a look at the case of Elisa, who is 60 years old and started receiving an early old-age pension several months ago. To qualify, she accumulated a 30-year period of mandatory insurance contributions as an employee, and an additional period of 10 years whilst raising three children.

She therefore met the age and qualifying period conditions, namely:

• • Anyone aged over 60 years old who has at least 480 (40 years) qualifying months of insurance contributions, whether mandatory, continued, voluntary, through retroactive purchases or additional periods, including at least 120 months of insurance, whether mandatory, continued, voluntary or through retroactive purchases, is entitled to an early old-age pension.
  • Anyone aged over 57 years old who has at least 480 qualifying months of mandatory insurance contributions. In other words, you must have worked from the age of 17 in order to retire at 57.

To know if he is eligible for an early old-age pension at 57 or 60 years old, Franck will need to check how many different periods of insurance contributions* he has accumulated during his working life.

Source: CSL

Useful info: An old-age pension is not granted automatically at the age of 65 or earlier. A request must be submitted a few months before you are eligible, by filling out a form that is available on the website of the Caisse Nationale d’Assurance Pension (CNAP).

If you are a member of several pension schemes (private and public), the request should be made to the most recent pension fund. Finally, cross-border workers who have worked in several countries should contact the competent authority in their country of residence. NB: it is possible that an employee who has worked in several countries is eligible for an old-age pension in one country but not yet in another. In this case, the employee will be eligible for a limited amount for several years whilst waiting to become eligible for payment of the old-age pension in the other country.

The length of time it takes to process pension claims varies from person to person. It depends on the availability and reliability of the data.

What level of compensation does an early old-age pension offer?

The calculation method is the same for a state pension at 65 years as for an early old-age pension.

Compensation depends on two elements: the number of months of contributions and the amount earned. These are referred to as flat-rate mark-ups (granted on the basis of the period during which insurance contributions were paid) and proportional mark-ups (linked to the income on which contributions were paid during the career). The amount is then adjusted on the basis of the cost of living and the applicable uplift. In 2024, the minimum old-age pension for 40 years of contributions was EUR 2,244.82.

Retirement often means a fall in income. That’s why Franck should check in advance how to maintain his standard of living in retirement.

Useful info: A person drawing an old-age pension (i.e. from 65) can also receive income from their professional work. However, if you receive an early old-age pension you must respect certain criteria in order to avoid this affecting the amount of pension you receive. Otherwise the old-age pension could be reduced or even withdrawn.

Source: CSL

Franck’s eligibility for an old-age pension at 65 or earlier is now clear. But what about Tony’s early retirement? What are the eligibility criteria for that?

An early old-age pension falls within the scope of pension insurance, while early retirement is a social welfare measure to prevent unemployment.

What is early retirement in Luxembourg?

We sometimes tend to confuse an early old-age pension and early retirement, all the more so since both are possible from the age of 57. Yet these are two different schemes: an early old-age pension falls within the scope of pension insurance (CNAP), while early retirement is a social welfare measure to prevent unemployment. As an example, it may be used by an employer to avoid redundancies if a company is struggling economically, or to encourage the appointment of a jobseeker. It is therefore subject to strict conditions on the employer who may, where applicable, offer this option to any employees who meet the eligibility criteria.

For early retirement, it is important that the employee properly understands that not only must they be eligible, but their employer must be willing to set up this option. If that’s the case, and it is quite unusual, you must be at least 57 years old and eligible for an old-age pension or an early old-age pension within three years. For example, Tony will take progressive early retirement which will enable him to reduce his working hours by 50% and to train up a young jobseeker.

There are several types of early retirement possible in Luxembourg, providing certain conditions are met, and for a maximum period of three years.

• • Progressive early retirement: enables an employee to gradually reduce their working hours to free up a position for the appointment of a jobseeker. Employees in the private sector are eligible if they have worked the equivalent of at least 75% of a full-time position at a company for at least five years.
  • Early retirement for corporate restructuring: this can be requested by an employer to avoid redundancies if a company is struggling economically (bankruptcy, restructuring, etc.). It is awarded to employees who have worked at the company for at least five years (or one year in the case of bankruptcy), and lasts for a period of one year (or for the length of a valid redundancy plan or employment retention plan). As an extension of early retirement for corporate restructuring, early retirement for persons in receipt of unemployment benefits paid by the Agence pour le Développement de l’Emploi (ADEM) also exists.
  • Early retirement for shift-work and night-work employees: enables a position to be freed up for the appointment of a jobseeker or apprentice. This relates to employees in the private and public sectors who have worked for 20 years in shift work (successive shifts) or in permanent night work, and employees who have worked 15 years in shift work (with permanent night work) during the last 25 years of employment.

Useful info: Whatever the type of early retirement, it is equivalent to a period of insurance contributions. This means that contributions paid during early retirement will be taken into account when calculating the old-age pension.

The employee must request early retirement from the company, or from ADEM in the case of persons in receipt of unemployment benefits. However, in order to qualify for early retirement, the company is subject to specific conditions regarding compensatory hires, and must have concluded a special agreement with the Minister responsible for employment issues or have made provision for such a scheme in a collective employment agreement.

How is an early retirement pension calculated in Luxembourg?

In principle, early retirement benefits are based on the average annual salary and variable income. In the case of progressive early retirement, it is adjusted in proportion to time worked. During the three years that it is paid, benefits decrease gradually: 85% of the salary during the first 12 months, 80% in the following 12 months, and 75% for the remainder of the period covered. Finally, as with the old-age pension, compensation is limited to five times the minimum wage.

Franck now has a better understanding of the difference between an early old-age pension and early retirement. Although he isn’t eligible for any type of early retirement in Luxembourg, he is going to make enquiries about getting his old-age pension early. To do this, he needs to put together all of the documents providing justification of his qualifying periods of insurance contributions: periods of employment, unemployment, parental leave, study, etc. To help him prepare his application and ensure that he hasn’t forgotten anything, Franck can take a look at the pension checklist  on myLIFE.

Good luck!

*The different periods taken into account in calculating qualifying periods of insurance contributions are detailed in the CNAP brochure: La pension de vieillesse au Luxembourg (Appendix 1).