Determining the treatment of acquired rights from a supplementary pension scheme in case of resignation/dismissal

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Supplementary pension schemes (also called additional pension schemes) are mechanisms set up by companies to provide their employees with benefits in case of:

  • retirement; or
  • disability; or
  • death; or
  • death of a spouse, partner or parent.

The purpose of these schemes is to supplement the benefits provided by legal social security schemes for the same risks.

Who is concerned?

Only salaried employees affiliated to a supplementary pension scheme are concerned: they can benefit from the rights acquired under this scheme when they leave the company.

Supplementary pension schemes are intended for:

  • either all salaried employees;
  • or certain categories of salaried employees.


Setting up and financing a supplementary pension scheme in a company

The establishment of a supplementary pension scheme is not mandatory for companies: for that reason, not all companies will set up a supplementary pension scheme.

In addition, some schemes are limited to a certain category of company staff: it is therefore possible that some employees in the same company have a supplementary pension scheme, but others do not.

The financing of these schemes is the responsibility of the employer. However, employees may be allowed to participate in the financing by making personal contributions.

Some supplementary pension schemes only provide benefits in the event of the beneficiary's disability or death. They therefore only cover the actual period of employment and do not cover these risks after leaving the company, nor do they provide any entitlement to pension benefits.

How to determine whether a salaried employee is covered by a supplementary pension scheme

There are 3 documents that allow employees to find out whether they are covered by a supplementary pension scheme:

  • their employment contract must, if applicable, contain information on:
    • the existence and nature of a supplementary pension scheme;
    • whether the scheme is compulsory or optional;
    • the entitlements to the scheme's benefits;
    • whether or not there are any personal contributions;
  • the pension regulations: when joining a supplementary pension scheme, employees receive a copy of the pension scheme regulations applicable to them. This regulation covers all the rights and obligations arising from this supplementary scheme for the employee and for the company that has set up the scheme;
  • a statement sent to the employee at least once a year which provides information on:
    • pension reserves acquired or in the process of being established;
    • in this case, the amount earned and the personal contributions paid.

Vesting period

Many supplementary pension schemes require the beneficiary to complete a vesting period in order to qualify for supplementary pension rights.

Therefore, at the time of leaving the company, the employee may or may not have acquired rights depending on:

  • the vesting period set by the pension regulation; and
  • the employee's length of service in the company.

How to proceed

How are the rights acquired applied after leaving a company?

Employees must decide how they wish to apply their acquired rights from the supplementary pension scheme for the period after leaving the company. This application depends on their status at the time of leaving the company:

This choice must be made when the employee leaves the company:

  • before retirement age; and
  • after having been affiliated to a supplementary pension scheme.

Usually, the employer or their appointed manager (an insurance company or a management company) provide outgoing employees with a form. Beneficiaries must use the form to indicate their choice with respect to what shall happen with their acquired rights for the period after their departure from the company. Thus, depending on the possibilities provided for in the pension regulations, the beneficiary may opt for:

  • the preservation of their acquired rights in their (former) employer's scheme; or
  • the transfer of the acquired rights to another supplementary pension scheme:
    • which is set up by a new employer;
    • or set up with an approved manager to receive acquired rights; or
  • the buyback of acquired rights.

Preserving acquired rights

Any supplementary pension scheme guarantees the preservation of all acquired rights, even in the event of dismissal for serious misconduct.

The preservation of acquired rights may cease before the scheme member's retirement provided he or she opts for a transfer or a purchase of their acquired rights.

The vested benefits of the supplementary pension scheme are preserved until the member's retirement.

For departures after 1 January 2019, supplementary pension schemes must offer beneficiaries the possibility of opting for a reimbursement of their acquired reserves in the event of death between their leaving the company and their retirement, bearing in mind that these acquired rights may be subject to recalculation.

Transfer of acquired rights

Employees who leave the company before their retirement age can request the transfer of their acquired rights:

  • either to the supplementary pension scheme set up by the new company that the employee joins. This transfer requires the agreement of all parties involved (the beneficiary, the company they leave and the company they join);
  • or to an approved supplementary pension scheme (pension fund or supplementary pension insurance). Except in the case of acquired rights from a defined benefit scheme, this transfer does not require the beneficiary's agreement. However, it may not entail any transfer fees.

The transfer mechanism allows beneficiaries who have been members of several supplementary pension schemes during their career to consolidate their acquired rights under a single scheme. Such a consolidation has the double advantage of:

  • making it easier to follow up on acquired rights;
  • reducing management costs that might otherwise multiply.

Transferring rights to an approved supplementary pension scheme also has the advantage that beneficiaries do not have to go back to their former employer(s) when they retire to claim their rights.

Buyback of acquired rights

In some cases, beneficiaries lose active membership of the supplementary pension scheme (e.g. because they are no longer in active service with the employer). They then have the possibility to buy back their acquired rights.

The right to buy back must be provided for in the applicable pension regulation (not all regulations provide for this possibility).

Furthermore, the buyback of acquired rights from a supplementary pension scheme is only possible when:

  • the acquired reserves at the time of application do not exceed 3 times the monthly social minimum wage for an unskilled worker of at least 18 years of age; or
  • the beneficiary is no longer covered by Luxembourg health insurance due to their new activity (employed or self-employed). For example, the beneficiary starts a new activity for an employer established outside Luxembourg.

Only the beneficiary may take the initiative to buy back. Neither the former employer nor a scheme manager can force beneficiaries to buy back their acquired rights.

In the case of a buyback of acquired rights, the member receives the current value of their reserves on the day of their request in the form of capital. This operation terminates the rights and obligations under the supplementary pension scheme.

Buyback is not possible for employees who are still in active service with the employer who set up the supplementary pension scheme.

Request for the payout of the supplementary pension in case of retirement

Employees may request payment of their supplementary pension in the form of an annuity or a lump sum provided that they:

  • leave their employer; and
  • meet the conditions for retirement laid down by the supplementary pension scheme (usually because they reach the retirement or early retirement age laid down in the pension regulations).

The form of pension payment is determined by the pension regulations.

To request this payment, the employees must contact their former employer or the manager of the supplementary pension scheme (insurance company, pension fund manager, consultant, etc.).

Tax treatment of a supplementary pension scheme

The tax treatment of a supplementary pension granted by an employer is further explained in our explanatory information page.

If the beneficiary of a supplementary pension benefit is also a beneficiary of the Luxembourg long-term care insurance, the supplementary pension benefit is subject to the 1.4 % long-term care insurance contribution.

Online services and forms

Who to contact

General Inspectorate of Social Security - Supplementary Pension Scheme Department

Related procedures and links

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