The Luxembourg progressive pension scheme
As of 1 January 2026, Luxembourg has introduced a new progressive pension scheme following the pension reform adopted in December 2025, as set out in Articles 584-8 et seq. of the Luxembourg Labour Code. This mechanism aims to facilitate a gradual transition from active employment to retirement for employees who are close to pension eligibility and wish to reduce their working time while receiving partial pension benefits.
The progressive pension differs from existing early or partial retirement arrangements and constitutes a unique legal regime. Access to this scheme is not automatic and requires the employer’s consent. Employees must request a diminution in working hours of at least 25% compared to their previous workload, while maintaining a minimum working time of 16 hours per week. In addition, the employee must already meet the conditions for entitlement to an early old-age pension and must have worked at least 75% of a full-time position during the three years preceding the request.
The procedure involves several formal steps.
(i) The employee must first obtain a certificate from the National Pension Insurance Fund (CNAP) confirming the date from which early pension rights are available.
(ii) This certificate must be submitted to the employer together with the request for reduced working time at least four months before the intended start date.
The employer has one month to respond.
If the request is accepted, an amendment to the employment agreement must be concluded and submitted to the CNAP no later than two months before the diminution in working hours takes effect. The CNAP then confirms the employee’s admission to the progressive pension scheme at least one month in advance.
From a financial perspective, the employee continues to receive remuneration corresponding to the reduced working hours, combined with a progressive pension benefit. This benefit is calculated proportionally, based on the reduction in working time and the amount of the early old-age pension entitlement.
The progressive pension benefit is subject to the same tax and social security treatment as an early old-age pension, which may have implications for the employee’s overall income and contributions.
This new regime offers increased flexibility for employees nearing retirement, while also requiring careful planning and coordination between employees, employers and the pension authorities.
Do not hesitate to contact us for more information on this matter and visit our website and social media.
