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How to save €1,876 in taxes while saving for retirement in Luxembourg
Luxembourg's private pension deduction just jumped to €4,500. That's up to €1,876 in tax savings per year. Here's how the 111bis works and how to claim it.
That's the average tax saving taxx.lu customers get by deducting €4,500 with their private pension deductions. And since January 2026, the ceiling just went up by 41%.
If you're not contributing to a private pension plan yet, you're paying more tax than you need to. If you already are, you might not be contributing enough. Either way, there's money to be saved.
Here's how it works.
The 111bis: Luxembourg's best-kept tax secret
It's not actually a secret. But given how many people still don't use it, it might as well be.
A private pension plan (also called "prévoyance-vieillesse" or "3rd pillar") is a voluntary retirement savings contract. You pay into it regularly, the money grows over time, and you access it from age 60.
The tax benefit? Every euro you contribute is deductible from your taxable income, up to a ceiling that just got a lot more generous.
The new limit: €4,500 per person
Until the end of 2025, the maximum deductible contribution was €3,200 per person per year. Since 1 January 2026, that limit is €4,500. That's a 41% increase.
For a couple where both partners contribute, the total deductible amount is now €9,000 per year.
This deduction applies regardless of your age. Whether you're 25 or 55, the ceiling is the same. And it applies to both Luxembourg residents and cross-border workers who qualify for tax assimilation.
What changed
The old limit of €3,200 per person was in place since 2017. The increase to €4,500 came as part of the Luxembourg pension reform voted at the end of 2025. The goal: encourage more people to build supplementary retirement savings alongside the state pension (1st pillar).
How much do you actually save?
Your tax saving depends on your marginal tax rate. Here's what €4,500 in contributions gets you:
| Marginal tax rate | Tax saving per year (single) | Tax saving per year (couple) |
|---|---|---|
| 25.2% | €1,134 | €2,268 |
| 30.1% | €1,355 | €2,709 |
| 35.0% | €1,575 | €3,150 |
| 39.0% | €1,755 | €3,510 |
| 41.7% | €1,877 | €3,753 |
Where €1,876 comes from
It's the average tax saving taxx.lu customers get from their 111bis deductions. Most people working in Luxembourg fall in a marginal rate range where the saving lands right around this figure.
These rates include the contribution to the employment fund (Fonds pour l'Emploi), which adds 7% on top of the base income tax rate (or 9% for higher incomes).
How the 111bis works in practice
You choose how much and how often. Monthly, quarterly, annually, it's up to you. To reach the full €4,500 ceiling over the year, that's €375 per month.
Your money grows over time. Depending on the contract, your contributions are invested in funds (with higher growth potential) or in a guaranteed-rate product (with lower risk).
You access your savings from age 60. The earliest you can withdraw is 60, the latest is 75. You can choose a lump sum, a life annuity, or a combination of both.
Taxation at withdrawal is favourable. When you take your capital at retirement, it's taxed at half your overall rate. So you get a full deduction going in, and only half the tax coming out. The net benefit over the lifetime of the contract is significant.
This is a long-term commitment
The money in a 111bis contract is locked until age 60 (with very limited exceptions). Only invest what you won't need in the short or medium term. If you're 30 and contribute €375 per month, that's 30 years of compound growth before you touch it.
The conditions
For your contributions to be tax-deductible, your 111bis contract must meet a few criteria:
- Taken out with an insurance company or credit institution authorised in Luxembourg or the EU
- Minimum contract duration of 10 years
- Savings accessible no earlier than age 60 and no later than age 75
- You must attach a certificate from your insurer or bank to your tax return confirming the amount paid
The good news: contracts from insurers in your country of residence (France, Belgium, Germany) can qualify, as long as they meet these conditions and the insurer is authorised to operate in Luxembourg.
Don't confuse the three pillars
Luxembourg's pension system has three layers. They're complementary, not interchangeable.
Pillar 1: State pension (CNAP). Mandatory. Funded through social security contributions deducted from your salary. This is the pension you'll receive from the state when you retire.
Pillar 2: Employer supplementary pension (RCP/LRCP). Optional, set up by your employer. If your company offers one and you contribute, your personal contributions are deductible up to €1,200 per year. This deduction is usually already accounted for on your payslip.
Pillar 3: Private pension (111bis). Voluntary. This is the one you set up yourself, with up to €4,500 per year in tax-deductible contributions. It's the pillar where you have the most control and the biggest tax optimisation potential.
Check your payslip for Pillar 2
If your employer offers a supplementary pension scheme, your deductible contributions (up to €1,200/year) should appear on your annual salary certificate, usually on line 21 labelled "LRCP". Make sure this is correctly declared on your tax return.
Cross-border workers: this applies to you too
If you qualify for tax assimilation (at least 90% of income from Luxembourg, or less than €13,000 foreign income, or the 50% rule for Belgian residents), you can deduct your 111bis contributions just like a resident.
Your contract doesn't even need to be with a Luxembourg insurer. As long as the provider is authorised in an EU member state and the contract meets the standard conditions, you're good.
taxx.lu checks your eligibility automatically
Enter your income details and taxx.lu verifies whether you qualify for assimilation. If you do, the 111bis deduction is applied to your return. If you already have a contract, import your certificate via AutoScan and the amount is pre-filled (though as always, check the pre-filled data).
Why starting now matters
The compound interest argument is well-worn but it's also true. Someone who starts contributing €375/month at age 30 will have a substantially larger pot at 60 than someone who starts the same contributions at 45.
But even if you're closer to retirement, the tax saving alone makes it worthwhile. Here's what maxing out the €4,500 deduction looks like over time, at a marginal rate of around 39%:
| Age you start | Years until 60 | Total contributed | Total tax savings |
|---|---|---|---|
| 25 | 35 years | €157,500 | €61,425 |
| 30 | 30 years | €135,000 | €52,650 |
| 35 | 25 years | €112,500 | €43,875 |
| 40 | 20 years | €90,000 | €35,100 |
| 45 | 15 years | €67,500 | €26,325 |
| 50 | 10 years | €45,000 | €17,550 |
The tax savings column alone is striking. And that's before you factor in the returns your money earns while invested. Your contributions don't just sit there: depending on your contract, they're invested in funds or guaranteed-rate products, so your actual retirement pot will be larger than what you put in. Even starting at 50, you're looking at over €17,000 in tax savings across 10 years, plus whatever your fund generates on top.
Investment involves risk
Past performance is not a guarantee of future returns. The value of your investments can go down as well as up. Make sure you understand the risk profile of your chosen contract before committing.
These are cumulative tax savings only
The table above shows the total tax you avoid paying over the years. Your actual retirement pot will be larger because your contributions also generate returns over time. The exact amount depends on your chosen investment strategy.
And here's the forward-looking angle: the deductions you make this year will be claimed on your 2026 tax return, filed in 2027. If you haven't started yet, every month you wait is a month of deductions you'll never get back.
How taxx.lu helps
Opti-Score. If you haven't maxed out your 111bis, the Opti-Score flags it. It shows you exactly how much room you have left and what the tax impact would be. Remember: the Opti-Score is forward-looking. It tells you what to do this year to improve next year's return.
Real-time refund estimate. As you fill in your return, you see the impact of your 111bis contributions instantly. Add €4,500 in pension contributions and watch your refund go up (or your tax bill go down) in real time.
AutoScan. Import your insurer's certificate and taxx.lu pre-fills the amount. As always, check that the pre-filled data matches your documents.
Personalised optimisation analysis. Every package includes a tax optimisation analysis that highlights where you could still save, including retirement savings.
The 2025 tax return is live. Start now.
The official ACD forms are available from April 7, but your 2025 tax return is already ready to fill in on taxx.lu. If you contributed to a 111bis plan in 2025, make sure it's on your return. If you didn't, your Opti-Score will show you what you're missing for next year.
Creating an account is free. Running a simulation is free. You only pay when you're ready to download the final form.
€1,876 is the average saving. Yours could be more.
