Private pension insurance in Luxembourg: the deduction limit increases to €4,500 in 2026

Private pension insurance in Luxembourg: how much can you save with the new €4,500 limit? Calculations, examples and tips to optimise your taxes in 2026.

Great news for your wallet (and your retirement): since January 1st, 2026, you can deduct up to €4,500 per year on your pension insurance. That's €1,300 more than before, and potentially thousands of euros in tax savings.

What's changing in 2026

The Luxembourg government voted on a major pension reform at the end of 2025. One of the key measures: a significant increase in the tax deduction limit for private pension contracts (also known as "prévoyance-vieillesse" or "3rd pillar").

	Before	Now
Annual limit	€3,200	€4,500
Per person	✓	✓
For a couple	€6,400	€9,000

That's €1,300 in additional deductions per year per person, a 41% increase.

Private pension vs CNAP pension: what's the difference?

Quick clarification, as these are often confused:

The CNAP pension (1st pillar) is the state pension. It depends on your years of contributions and your salary. The CNAP payment calendar for 2026 remains unchanged (monthly payments, with a year-end bonus in December).

Private pension insurance (3rd pillar) is personal savings you build yourself through a pension insurance contract. This is what benefits from the new €4,500 limit.

The idea? Don't rely solely on the state pension, build additional capital for your retirement while paying less tax today.

How much can you save? Real examples

Let's look at the numbers. Your tax savings depend on your marginal tax rate.

Example 1: Single person, 39% marginal rate

You contribute €4,500 per year to your private pension contract.

Example 2: Married couple, 42% marginal rate

You each contribute €4,500 per year, totalling €9,000.

Example 3: Before vs after the reform

Let's take a taxpayer with a 35% marginal rate:

	Old limit (€3,200)	New limit (€4,500)	Difference
Annual deduction	€3,200	€4,500	+ €1,300
Tax savings/year	€1,120	€1,575	+ €455
Savings over 10 years	€11,200	€15,750	+ €4,550

Thanks to the reform, this taxpayer saves an extra €455 in taxes every year.

Why it's worth it (even if you're young)

We often hear: "Retirement is far away, I have time to think about it." But here's why starting early is a smart move:

1. The power of compound interest
The earlier you start, the more time your savings have to grow. Contributing €100/month for 30 years yields far more than €200/month for 15 years.

2. Immediate tax savings
You don't pay less tax "someday", you pay less on this year's tax return. That's money in your pocket soon.

3. Flexibility
Contrary to popular belief, you don't have to contribute the maximum. You can start with €50 per month and increase later.

4. Access to your capital from age 60
Your savings are available from age 60, either as a lump sum or as an annuity, your choice.

What you need to know before subscribing

Contributions are flexible

No need to contribute €4,500 all at once. You decide the amount and frequency:

• Monthly contributions (starting from €50)
• Annual contributions
• One-off contributions

The limit is per person

If you're a couple, each of you can deduct up to €4,500. That's €9,000 in potential deductions for two.

Funds are locked until age 60

That's the deal: the money is meant for your retirement. In return, you get a tax advantage. There are some exceptions, but overall, it's a long-term investment.

Taxation at withdrawal

When you withdraw your capital (from age 60), you'll be taxed, but at half the normal rate. So the tax advantage remains very attractive over the full cycle.

How to take advantage of the new limit

Don't have a contract yet?

Now is the perfect time to start. The process is simple:

1. Run a simulation to estimate your tax savings
2. Choose your contribution amount
3. Subscribe online (takes 2 minutes)

👉 Apply online

Already have a contract?

Consider increasing your contributions to make the most of the new limit. If you were contributing €3,200, you can now go up to €4,500, that's €1,300 more in deductions.

Contact your insurer or file your tax return on taxx.lu to see the impact on your taxes. We show you all your optimisation options and how much you can still save.

Other changes in the 2026 pension reform

The increased limit isn't the only measure. Here's what else is changing:

Early retirement becomes harder

Access to early retirement (at 60) will be gradually tightened. From 2026, you'll need to extend your career by one extra month, then two in 2027, four in 2028, and so on.

Higher contributions

The overall pension contribution rate increases from 24% to 25.5%. That's about 0.5% more deducted from your gross salary.

Incentives to work beyond 65

People who continue working after 65 benefit from a tax allowance of up to €9,000 per year.

In summary

• The deduction limit for private pension insurance increases from €3,200 to €4,500 per year per person
• For a couple, that's up to €9,000 in deductions, potentially over €4,000 in tax savings
• Contributions are flexible: start with what suits you, every euro counts
• Now is the ideal time to subscribe or increase your contributions

Questions?

📞 Book a free call with an advisor

👉 Apply online (2 minutes)