Reform of the supplementary pension system

31 Aug 2018


Dorothée David

The law of 1 August 2018 reforming the supplementary pension system (hereinafter referred to as “the Law”) was published in Mémorial A no. 708 on 21 August 2018. The Law will come into force on 1 January 2019, with the exception of the provisions of article 8 on the acquisition of rights, which came into force on 21 August 2018. 

The changes introduced by the Law relate in particular to the following points: 

  • Scope of the Law extended to the self-employed and liberal professionals: specific supplementary pension systems, subject to the prior agreement of the “Inspection Générale de la Sécurité Sociale”, are put in place to take pension contributions paid by self-employed workers. 
  • Deadline for the acquisition of rights: the period for acquiring rights to supplementary pensions cannot exceed 3 years, compared with 10 years before the Law. More specifically, according to the Law:
    • for members (“affiliés”) who started work after 20 May 2018, the total cumulative period for the acquisition period and a possible waiting time, if applicable, cannot exceed three years.
    • for members who started work before 21 May 2018, the total cumulative period for the acquisition period and a possible waiting time, if applicable, cannot exceed ten years nor extend beyond 20 May 2021. 
  • What happens to acquired rights if a member leaves before the retirement age:
    • if acquired rights are transferred: the Law stipulates that the acquired rights can now be transferred to another scheme of the company. In contrast, the transfer of acquired rights to a life insurance company is no longer allowed by the Law. It is still possible to transfer to another supplementary pension system put in place with another company or another group of companies, as well as to an accredited supplementary pension system, as stipulated by the new law.
    • if the acquired rights are maintained: the Law now specifies the rules designed to determine the value of the acquired rights when the member choses to maintain them in the system used by their previous employer until they retire. The Law also stipulates that when they leave the company, the member must be able to opt for a refund of the reserves acquired in the event of death before reaching retirement age, whilst also accepting a potential recalculation of the value of acquired benefits.
    • if the acquired rights are bought back: the Law restricts the possibility of the member asking for their acquired rights to be bought back in the following two cases only: when the reserves acquired by the member do not exceed 3 times the minimum social wage for unqualified workers (€6,145.62), or if the worker is carrying out a new activity for which s/he is no longer subject to Luxembourg sickness insurance (in this case, the condition relating to accumulated reserves is not applicable). 
  • Information for members: the employer’s obligation to provide information is extended and consolidated. In particular, the Law specifies and adds to the list of details that must be provided in writing at least once a year to members. The Law also specifies that from now on, the company must inform, in writing, any member who asks about any consequences of stopping work on their rights to a supplementary pension. The Law also obliges the employer to inform an outgoing member of the choices available regarding the destination and the conditions of treatment of any reserves acquired if the acquired rights are maintained. This information must be provided within 30 days of the member’s departure. 
  • Company transfer: the Law clarifies how rights that have been acquired or are in the process of being formed are dealt with in the event of a company transfer, and in particular specifies that such a transfer cannot result in any reduction in these rights.

Law of 1 August 2018 reforming the supplementary pension system