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Supplementary pension scheme (RCP) in Luxembourg
Zusätzliches Pensionssystem (RCP) in Luxemburg, ohne Behördendeutsch erklärt. Für Angestellte und Selbstständige. Vesting, Steuern, Auszahlung.
Employer pension plan. The kind of phrase you skim past in your employment contract. And that's a shame.
Since the 2018 reform, Luxembourg's supplementary pension scheme (RCP) has become more accessible, more flexible, and more tax-efficient. For the first time, the self-employed can join in too.
Here's what changed, without the bureaucratic jargon.
What's the RCP, again?
The supplementary pension scheme is an employer-funded pension that tops up your state pension. Your employer (or you yourself, if you're self-employed) makes contributions, which are invested, then paid back to you at retirement as a lump sum or annuity.
The goal: bridge the gap between your final salary and your state pension. Because the state pension alone rarely covers your previous standard of living, unless you've had a long, well-paid career.
Don't confuse the two
The RCP is an employer pension (the second pillar). Not to be confused with the private 111bis pension plan, which you take out individually (the third pillar).
The RCP was first framed by the law of 8 June 1999. Solid, but a bit rigid. The law of 1 August 2018, which came into force in 2019, gave it a serious overhaul. Four changes worth knowing.
1. The self-employed get a seat at the table
Until 2018, only employers could set up an RCP, and only their employees benefited.
Since the reform, self-employed workers and freelance professionals can also join similar approved schemes. Doctors, lawyers, consultants, tradespeople: you can now build secure, tax-efficient retirement savings, in a framework comparable to that for employees.
Example
Léa is a self-employed consultant. Her net professional income is €80,000. She can contribute up to 20% of that to an RCP, that's €16,000 a year, deductible from her taxable income.
2. Vesting: three years instead of ten
Vesting is the period after which your supplementary pension rights truly belong to you, even if you leave the company.
Before the reform, this could stretch up to ten years. Changed jobs after eight years? Your accrued rights stayed with your previous employer.
Now, it's three years maximum. Shorter, fairer, more in step with modern career mobility (and with the EU directive of the same name).
Who it applies to
For employees hired from 21 May 2018 onwards, it's three years straight away. For older contracts, the previous limit still applied, but couldn't extend beyond 20 May 2021. By now, everyone is on the new regime.
3. More options when you leave the company
Before the reform, the law only guaranteed the transfer of the current value of your rights, with no obligation to preserve the nature of the benefits originally promised. Not ideal.
Today, you have three clear options:
- Full retention of your accrued rights, even in cases of dismissal or early departure.
- Transfer to another supplementary pension scheme, if an agreement is reached with the new employer.
- Lump-sum withdrawal in two cases: either when your accrued reserves are below 3 times the social minimum wage (paid out as the current capital value of your rights), or when you leave to work abroad and are no longer covered by Luxembourg health insurance. In the second case, no cap applies: you can withdraw the full amount.
Worth noting
Transferring rights to a standard life insurance policy is no longer permitted. The RCP stays within its dedicated framework.
4. The tax side (the most interesting part)
The RCP has its own tax regime, and it's rather generous.
On contributions:
- A flat-rate tax of 20%, paid by the employer (or the self-employed person).
- A 0.9% remuneration tax, non-deductible.
- For employees: nothing to pay on the employer's contributions. And at payout, the benefits are fully exempt from income tax (the flat-rate tax having already been applied on entry). Only the 1.4% dependency insurance contribution remains due at the time of payment.
- Employee bonus: if your plan allows it, you can also make personal contributions. These are deductible up to €1,200 a year as special expenses.
For the self-employed:
- Contributions are tax-deductible, up to 20% of net professional income.
- Translation: you save for retirement and reduce your current tax bill. Both at once.
Before you sign up
The RCP is only tax-efficient if your marginal tax rate exceeds 20.9% (the 20% flat-rate tax plus the 0.9% remuneration tax). Below that, the maths no longer works in your favour. Worth checking before you commit.
The taxx.lu angle
If you're self-employed and contribute to an RCP, these payments need to appear correctly in your return for the deduction to count. File the whole thing easily with taxx.lu. No spreadsheet to wrestle with.
In short
The RCP reform that came into force in 2019 did three useful things: it opened the scheme to the self-employed, secured the rights of mobile employees, and clarified the tax treatment.
The result: a more accessible, more flexible, and still tax-efficient retirement tool. Whether you're an employee, a self-employed doctor, or a freelance consultant, it's worth knowing where you stand.
For tailored advice, our team replies at agence@accounttech.lu. And when it's time to file your return, you know where to find us.
And while you're at it
Want to set up an RCP? Our agency does that too: write to agence@accounttech.lu.
