On Thursday 12 December 2024, Luxembourg’s Chamber of Employees (CSL) issued a statement on the possible pension system reform in Luxembourg.
According to the CSL, it will not accept any further reductions in pensions and it is mobilising to defend the rights of employees and retirees, and to raise public awareness of the "potentially dramatic consequences" of a reform aimed at reducing pensions.
The CSL argued that the last reform of the pension system, which took place in 2012, has already led to a substantial degradation of pensions, both current and future. The change in the formula for calculating pensions, as well as the questioning of the end-of-year allowance and the full adjustment of pensions to changes in salaries, are already weakening the purchasing power of retirees, it said. In this sense, the CSL expressed its opinion that a further reduction would "be unjustifiable and harmful for many generations".
The CSL added that in the last decade, the poverty rate among retirees has doubled, reaching 10.7% in 2023. The increase in the cost of living and uncertainties about the future contribute to making an already vulnerable ageing population even more vulnerable. Currently, the minimum pension, of around €2,245 gross per month for a full 40-year career, is "largely insufficient". This amount remains well below the poverty threshold, set at €2,452 net available per month in 2022, and does not ensure a decent life. The CSL argued that after 40 years of career, "it is unacceptable that a retiree has to live with uncertainty". The CSL thus suggested looking at increasing rather than further decreasing the minimum pension.
The CSL emphasised that it is crucial to clarify the public debate around pension reform. Contrary to what some claim, the Luxembourg pension system does not provide exorbitant pensions. The CSL noted that only 4.19% of pensions exceed €6,000 per month, and barely 0.14% exceed €8,000. On the other hand, almost 23% of residents receive a pension of less than €2,000 gross per month, which "is a real challenge for low-income retirees". In addition, the younger generations, "already penalised by the 2012 reform", risk suffering a significant loss in the long term. According to projections, an average employee could lose around €400,000 in pension over their entire retirement period, representing a significant deterioration in living standards, said the CSL.
The budgetary emergency argument, often used to justify a rapid reform, does not hold up to reality, according to the CSL. The National Pension Insurance Fund (CNAP) has reserves of more than €27 billion. These reserves allow pensions to be financed for 4.3 years without resorting to new revenues. Unlike other countries, such as Germany or France, whose pension funds are reportedly much less solid, Luxembourg is able to ensure sustainable financing of its pension system.
The CSL advocated for fairer and more sustainable management of the pension system. The use of current reserves could compensate for possible deficits initially, without having to reduce benefits, it suggested. In addition, economic projections show that Luxembourg's national wealth will continue to increase at a faster rate than pension expenditure, which will make it possible to finance pensions without resorting to austerity measures.
In the face of demographic ageing, the CSL said it believes that the challenges related to pension financing are "perfectly manageable". In its view, the system's revenue should be increased rather than reducing pensioners' benefits. Among the most viable solutions to sustain Luxembourg’s system, according to the CSL, is the adaptation of contributions. However, one of the main obstacles to this solution lies in the opposition of employers' organisations, which, "under the pretext of maintaining competitiveness", refuse to contribute to the financing of the system, to the detriment of employees and pensioners. The CSL also recalled that, compared to the cost of labour, employer contributions in Luxembourg are among the lowest in Europe and therefore an adaptation would not harm any competitiveness.
The CSL concluded by clarifying that it stands firmly against any reform that would further penalise current or future retirees, particularly those with modest incomes. It said it aims to "guarantee a fair and dignified future for all Luxembourg residents".
