Posted on 02 July 2022

Private pension plan - All you need to know!

What is a private pension plan ?

A private pension plan is an investment in different funds with the goal to build up a capital, that you can access earliest at the age of 60 years, so you can have an additional income at that moment of your life.

A short video can be found here: https://youtu.be/OJ_aNcDnNvo

How can I save on taxes with such a plan?

You can deduct your investments into the pension plan on your tax return. The maximum deductible limit is 3.200€ per year. Your tax savings depend on your income. Most taxpayers subscribing to such a plan, can save 1.335€ thanks to that deduction (+/- 42% of your investments). You could say that your “return on invest” on every investment you are doing is 42%. On top of that, you also benefit of course from the return on invest of the investment itself depending on the evolution of the stock markets.

How much money will I get out at the age of 60?

This depends on the duration of the contract, the amount you are investing and the return on invest on the stock market.

Let’s assume that you get an average return on invest of 5% a year and that you are investing 266€ a month (maximum to reach the 3.200€ deducible per year):

After 30 years: +/- 210.000€

Total investment over 30 years: +/- 96.000€
Total tax savings over 30 time: +/- 40.000€
“Net investment” over 30 years: +/- 56.000€

After 25 years: +/- 150.000€

Total investment over 25 years: +/- 80.000€
Total tax savings over 25 time: +/- 33.000€
“Net investment” over 25 years: +/- 47.000€

Is this capital taxed when you access it at age 60?

Yes. It will be taxed. But only at half of your average tax rate.

Example: If you are a couple with a taxable income of 200.000€, then the capital will be taxed at +/- 14%. However up to then, you got tax savings of 41,6% per year.

What if I leave Luxembourg?

If you leave Luxembourg after a few years, you have 2 options:

Option 1: Continue to invest into that pension plan and access the capital at age 60. However, those investments are probably not deductible in your new country.

Option 2: Stop your monthly investments without any fees. The capital will stay invested until you get 60 years old. At that moment, wherever you are living in the world, you can access the money.

There are no fees or tax reimbursements needed if you leave Luxembourg and stop your monthly investments.

What are the fees?

With easyLIFE Pension from Lalux you only have subscription fees (4,5%). No other fees apply.

Other insurance companies in Luxembourg have subscription fees AND management fees.

Management fees apply every month/year on the entire capital invested in the plan. This can cause an huge amount of fees over the entire duration of the contract.

With Lalux, if you leave Luxembourg and stop your monthly investments, no fees will apply, which is not the case for most of the other insurance companies in Luxembourg.

What if I die before age 60?

In that case, your kids, partner, family (to be determined in the contract) will get at least the sum of all your monthly investments at the moment of your death. So, a pension plan is also a good way to protect your loved one’s for the worst case scenario.

You are interested or you still have questions about the private pension plan ?
Do not hesitate to contact us by email : optimisation@accounttech.lu