Posted on
What if your stock market investments could also reduce your taxes?
In Luxembourg, a private pension plan can invest your money in the stock market while giving you up to 4,500€ in tax deductions per year.
Investing in the stock market. Reducing your taxes. Most people think of these as two completely separate things. Markets on one side, tax returns on the other. But what if you could do both at the same time?
That's exactly what a private pension plan (prévoyance-vieillesse, or 3rd pillar) in Luxembourg lets you do. If you pick the right formula, your contributions can be invested in funds, your money works on the markets, and on top of that, you deduct it all from your taxes. Up to 4,500€ per year.
How does it actually work?
A private pension plan isn't necessarily a classic savings account sitting in a corner doing nothing. When you take out a contract like LALUX's easyLIFE Pension and opt for the Performance formula, your contributions are invested in a selection of investment funds. In other words, your money is placed on the financial markets.
That's where it gets interesting, because you can benefit from a double advantage:
- Stock market performance: your capital grows with the markets. Over the long term, investment funds have historically delivered attractive returns.
- Tax deduction: every euro you pay into your pension plan is deductible from your taxable income, up to the annual limit.
Good to know
With LALUX, you can choose between two formulas: Security (guaranteed capital, no market exposure) or Performance (investment funds). It's your call. If you want to tap into market potential, the Performance formula is the one for you. Check out the list of available investment funds.
4,500€ in deductions per year, per person
Since 1 January 2026, the deduction limit for private pension insurance has gone from 3,200€ to 4,500€ per year per person. That's a 41% increase.
| Before | Now | |
|---|---|---|
| Annual limit | 3,200€ | 4,500€ |
| Per person | ✓ | ✓ |
| For a couple | 6,400€ | 9,000€ |
And more deductions means less tax to pay. Just to be clear, a tax deduction reduces your taxable income. It's not a tax credit, but the impact is very real.
How much can you save?
Your savings depend on your marginal tax rate. Here are some concrete examples.
Single person, 39% marginal rate
You contribute 4,500€ per year to your pension plan.
- Annual tax saving: 4,500€ × 39% = 1,755€
- Over 10 years: 17,550€ in tax savings
- Over 20 years: 35,100€ in tax savings
And that's without counting the potential returns generated by your funds if you opt for the Performance formula.
Married couple, 42% marginal rate
You each contribute 4,500€ per year, totalling 9,000€.
- Annual tax saving: 9,000€ × 42% = 3,780€
- Over 10 years: 37,800€ in tax savings
- Over 20 years: 75,600€ in tax savings
The double effect
By choosing the Performance formula, your money generates returns on the markets and you get back part of your contributions through the tax deduction. That's what makes this option so attractive compared to a standard stock market investment.
Why LALUX?
Not all private pension contracts are created equal. With LALUX's easyLIFE Pension, offered in partnership with taxx.lu, you get some real advantages:
- Flexibility: you can start from just 25€ per month and adjust your contributions at any time.
- Protection: in the event of death, your beneficiaries (spouse, children, family) receive the capital accumulated on your contract at the time of your death.
- Mobility: if you leave Luxembourg, your capital stays invested and continues to grow until the end of your contract.
What to keep in mind
Before you get started, a few important points:
Your capital is locked until age 60. That's the trade-off for the tax advantage. The money you invest is earmarked for your retirement. Except in special cases (serious illness, disability), you won't be able to access it before then.
At 60, you're taxed at half your rate. When you withdraw your capital, you'll be taxed, but at only half your average tax rate. So the tax advantage stays very attractive over the full cycle.
You don't have to contribute the maximum. Start with what you can. 50€ per month is already a great start. You can always increase later.
Something unexpected comes up? You stay in control. If your financial situation changes, you can pause your monthly contributions or reduce the amount at any time. And when things improve, you can pick back up or increase your contributions again.
Important
Only invest money you won't need in the short term. A pension plan is a long-term investment.
In a nutshell
A private pension plan in Luxembourg can be:
- A stock market investment through investment funds (if you choose the Performance formula)
- A tax deduction on your contributions, up to 4,500€ per year (regardless of the formula)
- Tax savings of up to 2,060€ per person per year
- Capital accessible from age 60, taxed at only half your rate
In short, it's probably one of the few cases where the stock market and the taxman can play on the same team.
Ready to invest in the stock market while reducing your taxes?
Discover the private pension plan on taxx.lu and calculate your tax savings in just a few clicks. Choose the formula that suits you. Free consultation, no strings attached.
