Pension Savings Tax Benefits in Luxembourg: €4,500 Deduction (2026)
Luxembourg offers a particularly favourable tax framework for pension savings: deductions of up to €4,500 per year per taxpayer since 1 January 2026 (previously €3,200 until 2025), or €9,000 for a couple. At the point of withdrawal, the capital is taxed at the half global rate — that is, your average tax rate divided by two. This tax framework is governed by Article 111bis of the amended Law of 4 December 1967 on income tax (L.I.R.).
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Compare contracts for free →Tax deduction on contributions: up to €4,500 per year
The main tax advantage of Luxembourg pension savings lies in the full deductibility of contributions from your taxable income. Under Article 111bis L.I.R., payments made under a pension savings contract are classified as special expenses, in the same category as certain insurance premiums or mortgage interest.
Unlike standard life insurance (Article 111 L.I.R., capped at €672 per household member — including children — shared with third-party liability premiums, health premiums and consumer loan interest), pension savings benefit from a considerably higher dedicated allowance: €4,500 per taxpayer since 1 January 2026. This limit is individual and independent of all other special expense categories.
| Contract type | L.I.R. article | Annual limit | Shared limit | Minimum duration |
|---|---|---|---|---|
|
Pension savings
Old-age provision
Best allowance
|
111bis L.I.R. | €4,500 | No — dedicated allowance | 10 years |
|
Life insurance
Standard savings
|
111 L.I.R. | €672 per household member | Yes — shared with car liability, health, consumer loans | None |
Source: Administration des contributions directes — Circular L.I.R. no. 111bis/1 of 27 April 2022 — Updated June 2026.
You can combine the 111bis deduction (€4,500) with the Article 111 deduction (€672 per household member). For a single person, the combined total is €5,172 in deductions per year; for a household of four, the Article 111 allowance can reach €2,688, giving a combined potential of over €7,000. Bear in mind that the Article 111 allowance may already be used up by other eligible expenses (car liability premiums, health premiums, consumer loan interest).
New 2026 limit: from €3,200 to €4,500
Since 1 January 2026, the annual tax deduction limit for pension savings contracts (Article 111bis L.I.R.) has been raised from €3,200 to €4,500 per taxpayer. This new limit is confirmed by the official financial information sheets of all approved Luxembourg insurers (LALUX, AXA, Baloise, Foyer).
| Period | Annual limit per taxpayer | Change |
|---|---|---|
| Until 31 December 2025 | €3,200 | — |
| Since 1 January 2026 | €4,500 | +€1,300 / +40.6% |
This increase represents an additional €1,300 in annual deductible contributions, translating to between €507 and €546 in extra tax savings for taxpayers in the highest brackets (39% to 42% depending on income).
Existing contracts — The new €4,500 limit applies to all contributions paid since 1 January 2026, even if your contract was taken out before that date. You can therefore increase your payments to take full advantage of the new limit in the current tax year, without amending your contract.
Eligibility conditions
To qualify for the tax deduction under Article 111bis L.I.R., four conditions must all be met simultaneously:
Minimum duration of 10 years
The contract must have a term of at least 10 years at the time of subscription.
Withdrawal age between 60 and 75
The contract maturity date (when you receive your savings) must fall between your 60th and 75th birthday.
Policyholder, insured and beneficiary must be the same person
The contract subscriber must be the policyholder, the insured person and the beneficiary at maturity. It is not possible to subscribe on behalf of a third party.
Maximum subscription age: 65
To fall within the scope of Article 111bis, the contract must be taken out no later than age 65.
Real tax savings by marginal tax rate
The tax saving you achieve depends directly on your marginal tax rate (MTR). The higher your income, the more valuable the deduction. The table below shows the annual savings on a contribution of €4,500, across the main brackets of the Luxembourg tax scale:
| Marginal tax rate (MTR) | Annual contribution | Tax saving | Net real cost |
|---|---|---|---|
| 8% | €4,500 | €360 | €4,140 |
| 14% | €4,500 | €630 | €3,870 |
| 26% | €4,500 | €1,170 | €3,330 |
| 38% | €4,500 | €1,710 | €2,790 |
| 39% | €4,500 | €1,755 | €2,745 |
| 40% | €4,500 | €1,800 | €2,700 |
| 42% (max L.I.R.) | €4,500 | €1,890 | €2,610 |
Switchr calculations based on the official Luxembourg income tax scale (tax class 1, 2025 brackets applicable from 1 January 2025) — Administration des contributions directes. The maximum L.I.R. rate is 42% (income above €234,870). Including the employment fund contribution (7%), the effective maximum rate can reach approximately 45.78%.
Worked example: Thomas, manager at 40% MTR
Thomas is 40 years old and works as a manager in Luxembourg. His marginal tax rate is 40%. He contributes €4,500 per year to his pension savings contract.
| Item | Amount |
|---|---|
| Annual contribution | €4,500 |
| Tax saving (€4,500 × 40%) | − €1,800 |
| Net real cost for Thomas | €2,700 |
Result: For €2,700 out of his own pocket, Thomas saves €4,500 in his contract. The Luxembourg state funds 40% of his savings effort. Over 25 years, this amounts to €45,000 in cumulative tax savings.
If your MTR is 40% or above, maximise your annual contribution to €4,500 to make the most of the tax advantage. The earlier you start, the more significant the cumulative effect of your tax savings becomes.
Tax treatment at withdrawal: lump sum or annuity
At your contract maturity (between ages 60 and 75), you choose between several payout options: a single lump sum, annual withdrawals up to age 75, a monthly lifetime annuity, or a combination of these. Each option has its own tax treatment under Luxembourg law.
Option 1: Lump sum (or annual withdrawals)
If you opt for a single lump sum or annual withdrawals, the benefit is taxed under the half global rate regime (Article 131, paragraph 1(c) L.I.R.). This mechanism calculates your average tax rate for the year of payment, then divides it by two to determine the tax owed on the pension savings capital.
Lump sum
- Half global rate (average rate ÷ 2)
- One-off taxation, capital then free
- Can be passed on to heirs
- Tax burden concentrated in payout year
- Capital management required afterwards
Lifetime annuity
- 50% of the annuity exempt for life
- Guaranteed monthly income
- No capital management needed
- 50% taxed at standard annuity rate
- Capital not transferable to heirs
Option 2: Lifetime annuity
If you choose a monthly annuity until death, 50% of the annuity amount is permanently exempt from tax (Article 115, no. 14(a) L.I.R.). The remaining 50% is added to your other income for the year and taxed at the standard rate for annuities and pensions.
Example: You receive an annuity of €1,000 per month (€12,000 per year). €6,000 is exempt. The remaining €6,000 is added to your other income and taxed normally.
A lifetime annuity is irrevocable in the majority of contracts: once chosen, you generally cannot reverse the decision or recover the capital. In the event of early death, any remaining capital is not passed on to heirs, unless a specific reversionary clause applies (available for example from AXA with MySmartPension).
Understanding the half global rate
The half global rate is a tax mechanism specific to Luxembourg, applicable to capital from pension savings contracts (Article 131, paragraph 1(c) L.I.R.). It is more favourable than taxation at the marginal rate, as it is based on your average tax rate — which is generally lower than your MTR — and then halves it.
3-step calculation method
Calculate total taxable income for the year
Add together all your income for the year (salary, statutory pension, rental income, etc.) as well as the pension savings capital.
Determine the average tax rate
The tax authority (ACD) calculates the theoretical tax on the total income, then divides this amount by the total taxable income. This average rate is always lower than your MTR (for example: 27% instead of 42%).
Apply the half rate to the capital only
The average rate is divided by two. This half rate applies only to the pension savings capital. Your other income (statutory pension, etc.) continues to be taxed normally.
Worked example: Claire, aged 65
Claire is retiring. She receives a statutory pension (CNAP) of €36,000 per year and cashes in her pension savings contract for a capital sum of €150,000.
| Step | Calculation | Result |
|---|---|---|
| Total income for the year | €36,000 (pension) + €150,000 (111bis capital) | €186,000 |
| Total theoretical tax | According to tax scale (class 1) | ~€47,000 |
| Average tax rate | €47,000 ÷ €186,000 | ~25.3% |
| Half global rate | 25.3% ÷ 2 | ~12.6% |
| Tax on 111bis capital | €150,000 × 12.6% | ~€18,900 |
| Net capital received | €150,000 − €18,900 | ~€131,100 |
These figures are indicative and depend on your personal tax situation in the year of withdrawal. The exact calculation is performed by the tax authority when processing your tax return.
To minimise the average rate in the year of withdrawal, avoid combining other significant exceptional income in the same year (redundancy pay, property sale proceeds, etc.). A lower total income means a lower average rate, and therefore an even more favourable half rate.
Tax optimisation for couples
Married couples taxed jointly (tax class 2) can benefit from a combined annual limit of €9,000 (€4,500 per spouse). This limit is individual: each spouse must take out their own pension savings contract. Contributions cannot be pooled into a single contract.
Optimisation strategies for couples
| Couple’s situation | Strategy | Estimated annual tax saving |
|---|---|---|
|
Two high earners
40% MTR each
|
Each spouse contributes €4,500/year Total: €9,000/year |
~€3,600/year |
|
Unequal incomes
42% MTR + 14% MTR
|
Prioritise the higher-earning spouse Spouse 1: €4,500 · Spouse 2: based on their MTR |
Depends on respective MTRs |
|
Single income
40% MTR — joint taxation
|
Working spouse: €4,500/year Non-working spouse: can also subscribe (see below) |
~€1,800/year |
Estimates based on the Luxembourg income tax scale (tax class 2 for married couples taxed jointly).
Joint vs individual taxation — Married couples may opt for joint taxation (class 2) or individual taxation (each in class 1). The choice of taxation method can significantly affect the overall tax advantage. Consult a tax adviser or the ACD to find the most suitable option for your situation.
Non-working spouse
A spouse without professional income can take out a pension savings contract and benefit from the tax deduction provided the household is taxed jointly (class 2). The non-working spouse’s contributions are deductible up to the limit of €4,500 per person.
Cross-border workers: eligibility for the tax deduction
Cross-border workers residing in France, Belgium or Germany may benefit from the Luxembourg pension savings tax deduction provided they meet the tax assimilation criteria set out in Article 157ter L.I.R. These criteria vary depending on the country of residence.
| Country of residence | Assimilation threshold | Legal basis | Deduction available |
|---|---|---|---|
|
France
French cross-border worker
|
≥ 90% of the household’s worldwide income must come from Luxembourg | Art. 157ter L.I.R. LU-FR tax treaty |
✓ €4,500 |
|
Belgium
Belgian cross-border worker
|
≥ 50% of the household’s worldwide income must come from Luxembourg | Art. 157ter L.I.R. LU-BE tax treaty |
✓ €4,500 |
|
Germany
German cross-border worker
|
≥ 90% of the household’s worldwide income must come from Luxembourg | Art. 157ter L.I.R. LU-DE tax treaty |
✓ €4,500 |
Source: Administration des contributions directes — Article 157ter L.I.R. (assimilation of non-residents).
If you do not meet the required assimilation threshold, you will not be able to deduct your pension savings contributions in Luxembourg. Furthermore, if an early surrender occurs before maturity or before 10 years, the tax legislation of your country of residence applies. It is strongly recommended to consult a cross-border tax adviser before subscribing.
Example: Sophie, French cross-border worker
Sophie lives in France and works in Luxembourg. Her Luxembourg salary is €75,000 gross per year. Her spouse works in France and earns €18,000 net. Household worldwide income: €93,000. Luxembourg share: €75,000 ÷ €93,000 = 80.6%.
Result: Sophie does not meet the 90% Luxembourg income requirement. She is therefore not eligible for the tax deduction in Luxembourg. She can still take out a contract, but without any tax benefit on contributions. For a tax deduction, she would need to look at French savings vehicles (such as the PER).
Belgian cross-border workers benefit from a more favourable threshold: only 50% of worldwide income needs to come from Luxembourg. For many mixed-income couples (one Luxembourg income + one Belgian income), this threshold is readily met.
Tax return: how to claim your deduction
To benefit from the tax deduction, you must declare your pension savings contributions in your annual tax return (form 100F). Contributions are to be entered in section « D — Special expenses » (page 15 of the form), under the heading relating to contributions paid under Article 111bis L.I.R. (not to be confused with section B.b « Insurance premiums and contributions » on page 14, which covers Article 111 premiums).
Steps to claim
Receive the tax certificate from your insurer
At the start of the year (January or February of year N+1), your insurer automatically sends you a tax certificate summarising the total premiums paid during year N. All insurers (LALUX, AXA, Baloise, Foyer) issue this document as a matter of course.
Complete form 100F
Declare your contributions on MyGuichet.lu or in paper form (form 100F), in the section « Special expenses — Old-age provision (Article 111bis L.I.R.) ».
Attach the tax certificate
For an online declaration, upload the certificate as an attachment. For a paper declaration, enclose it with your submission.
Receive your tax refund
The tax authority calculates your tax saving and incorporates it into your tax assessment. If you are a salaried employee with withholding tax, the saving is paid as a tax refund after your return has been processed.
What does the tax certificate contain?
The certificate provided by your insurer typically includes your personal details (name, surname, national identification number), your contract number, the total premiums paid during the tax year, and confirmation that the contract is a pension savings contract compliant with Article 111bis L.I.R.
Multiple contracts — You may hold several pension savings contracts with different insurers, but the combined annual limit remains €4,500 per taxpayer across all contracts. Transferring savings from one contract to another is not possible.
Pension savings (111bis) vs life insurance (111): what’s the difference?
In Luxembourg, two tax frameworks allow the deduction of insurance premiums: Article 111 L.I.R. (standard life insurance) and Article 111bis L.I.R. (pension savings). Although similar on the surface, these two frameworks differ significantly in terms of the deductible limit, constraints, exit tax treatment and flexibility.
| Criterion | 111bis — Pension savings | 111 — Life insurance |
|---|---|---|
| Deduction limit | €4,500 / taxpayer / year | €672 / household member / year |
| Shared limit | No — dedicated allowance | Yes — shared with car liability, health, consumer loans |
| Minimum duration | 10 years required | None (flexible) |
| Withdrawal age | Between 60 and 75 | Flexible (anytime) |
| Exit tax (lump sum) | Half global rate (average rate ÷ 2) | Half global rate (if duration ≥ 10 years) |
| Exit tax (annuity) | 50% exempt, 50% taxed | 50% exempt, 50% taxed |
| Early surrender | Not permitted — except serious illness or disability | Permitted at any time |
| Primary purpose | Retirement planning | Flexible savings, wealth transfer |
Source: Switchr comparison based on Articles 111 and 111bis L.I.R. — Administration des contributions directes — June 2026.
Can you combine both?
Yes. The limits under Articles 111 and 111bis are independent and can be combined. A single person can benefit from up to €5,172 in deductions per year (€4,500 under 111bis + €672 under 111). For a household of four, the Article 111 limit can reach €2,688 (€672 × 4), provided it is not already used up by other eligible expenses (car liability premiums, health premiums, consumer loan interest).
Recommended approach: maximise the 111bis deduction first (€4,500) to benefit from the highest allowance and the favourable exit tax treatment. Then use any remaining capacity under the Article 111 limit (€672) for additional savings without any duration constraint.
Frequently asked questions
What is the pension savings tax deduction limit in Luxembourg in 2026?
The limit is €4,500 per taxpayer per year since 1 January 2026 (compared to €3,200 until 2025). For a couple where each spouse takes out their own contract, the combined limit reaches €9,000 per year. This deduction applies to contributions under a pension savings contract compliant with Article 111bis L.I.R. The limit is confirmed by the official financial information sheets of all approved Luxembourg insurers.
How much tax can I save with pension savings?
The tax saving depends directly on your marginal tax rate (MTR). For a maximum contribution of €4,500: at 39% MTR, you save €1,755 per year; at 40%, the saving is €1,800 per year; at the maximum L.I.R. rate of 42%, it reaches €1,890 per year. These savings accumulate from one year to the next.
How does the half global rate work at withdrawal?
The half global rate is a favourable tax regime exclusive to capital from 111bis contracts. The tax authority calculates your average tax rate for the year of payment (including the capital in your total income), then divides that rate by two. This half rate applies only to the pension savings capital. Your other income (statutory pension, etc.) continues to be taxed normally. It is generally far more favourable than taxation at the marginal rate.
Can cross-border workers benefit from the tax deduction?
Yes, subject to conditions. Under Article 157ter L.I.R., French and German cross-border workers must demonstrate that at least 90% of their household’s worldwide income comes from Luxembourg. For Belgian cross-border workers, the threshold is 50%. If you do not meet these criteria, you may still take out a contract but will not be able to deduct the premiums in Luxembourg. Consult a cross-border tax adviser for your specific situation.
Can Article 111bis (pension savings) and Article 111 (life insurance) be combined?
Yes. The limits under both articles are independent and can be combined. For a single person, you can deduct up to €5,172 per year: €4,500 under 111bis + €672 under 111. For a household of four (couple + 2 children), the Article 111 limit can reach €2,688 (€672 × 4 members), provided that limit is not already used up by other eligible expenses (car liability premiums, health premiums, consumer loan interest).
How do I declare my contributions in my tax return?
Enter your contributions in form 100F (annual tax return), section « Special expenses — Old-age provision (Article 111bis L.I.R.) ». Attach the tax certificate that your insurer sends you automatically at the start of the year. You can file online at MyGuichet.lu and upload the certificate directly.
Can I surrender my contract early?
Early surrender is highly restricted. In virtually all Luxembourg contracts (LALUX, AXA, Baloise, Foyer), partial surrender is not permitted during the accumulation phase. Full early surrender is only exceptionally possible in the event of serious illness or disability causing significant professional incapacity for the policyholder. Any surrender outside these exceptional circumstances results in full taxation at the normal income tax rate, including on previously deducted contributions.
Can a couple deduct €9,000 per year?
Yes, provided each spouse takes out their own pension savings contract. The €4,500 limit is individual — it cannot be transferred from one spouse to the other, nor concentrated in a single contract. Two separate contracts are therefore required to reach the combined limit of €9,000 per year.
Does the new €4,500 limit apply to existing contracts?
Yes. The new limit applies to all contributions paid since 1 January 2026, even for contracts taken out before that date. You can increase your payments up to €4,500 per year without amending the other terms of your contract. Contact your insurer to adjust your contributions.
Which insurers offer pension savings contracts in Luxembourg?
Four insurers approved by the Commissariat aux Assurances (CAA) offer pension savings contracts (Article 111bis) in Luxembourg: LALUX (easyLIFE Pension — Security and Performance options), AXA (MySmartPension), Baloise (Pension Plan) and Foyer (horizon). Each offer has different characteristics in terms of guaranteed return, investment options and payout terms. Compare offers on Switchr →