Pensiouns rechner.

Yes, there is enough money to guarantee a good quality of life for pensioners in Luxembourg. What is lacking, however, is the government’s willingness to tap into new sources of funding to cope with the ageing population. The example of the money suddenly made available for the army and defence in Europe shows that where there’s a will, there’s a way. Making it a priority for everyone to be able to enjoy a decent retirement is possible. It would also guarantee that our purchasing power remains stable throughout our lives and does not suddenly decrease when we retire.

In Luxembourg’s pay-as-you-go pension system, pensions are financed by contributions deducted from gross salaries. There is therefore a close link between salaries and pensions: when the wage bill (= the total amount of all gross salaries) increases, there is automatically more money for pensions. In Luxembourg, the wage bill is increasing steadily year on year.

Sometimes, political discourse acts as if the wage bill is the only possible means of financing our pensions. But wages represent only part of the wealth produced in Luxembourg. There are also, for example, corporate profits and income from investments and real estate: these account for 43% of GDP and are not used to finance our pensions. Yet for decades, wages in Luxembourg have been rising less than the incomes of large companies and investors, even though an increasing share of the state budget comes from taxes on employees, while taxes on profits and investments are being cut further and further. déi Lénk demands that any pension reform be socially just and not carried out at the expense of the majority.

No: saying that the money available for our pensions depends on the number of people in work is like saying that the amount of fruit, vegetables, meat, etc. available in Luxembourg depends on the number of farmers in the country. However, even though there have been fewer and fewer farmers for a century, the amount of food, meat, milk, etc. has increased enormously because we use machines and are much more productive.

The problem is that this constantly increasing productivity has mainly benefited large companies, which use it to increase their profits. Ordinary people, whether employees or small business owners, have benefited much less. A worker today produces much more in an hour than a worker did 30 or 80 years ago, and will undoubtedly produce even more in the future. But these productivity gains are not translating into higher wages or shorter working hours. Nor are they translating into better pensions – even though a productivity tax would also be a possible way to continue financing our pension system.

No, it is not necessary: as the previous answers show, there are other, fairer ways to guarantee our pensions. Furthermore, the argument that life expectancy has increased does not hold water: life expectancy is currently stagnating in several European countries, and since 2012 it has only increased by one year in Luxembourg.
On top of that, Luxembourg employees work more hours per week (40 hours) than German (37.3) or French (35.7) employees. This extra time accumulates over the years, so it is only fair that people should be able to retire earlier: an employee in Luxembourg who retires at 60 after 40 years of work will in fact have worked 4.2 years longer than an employee of the same age in France, and 2.7 years longer than in Germany.

The main reason is that we have a pay-as-you-go system and have (at least until now) completely avoided the capitalisation system. What is the difference between the two?

In a pay-as-you-go system, this month’s contributions from workers immediately finance current pensions; in a funded system, each individual saves for their own pension through financial investments.

At first glance, it seems that the system that will serve me best is the capitalisation system: in this system, I only have to think about myself, whereas in the pay-as-you-go system, I seem to be ‘giving’ to pensioners. And employers and investors like to portray the pay-as-you-go system as if it were a gift from current employees to pensioners. This is extremely dishonest of them, because if they know anything about it, they know that a good pay-as-you-go system is the only one that guarantees a stable standard of living for everyone in retirement.

Indeed, financial investments in the capitalisation system are always risky – in the 2008 crisis, 925,000 elderly Americans had to return to work following the collapse of their pension systems. This is because the American pension system is a ‘mixed’ system, where there is a pay-as-you-go system but it does not guarantee an adequate standard of living in retirement. People are therefore forced to take out supplementary pensions that depend on the financial markets. This exposes them to the risk of poverty in retirement, as investments often do not provide a secure return.

The Luxembourg pay-as-you-go system, which depends on contributions from employees, the state and employers, is not dependent on fluctuations in the financial markets. It has a reserve of €30 billion, which gives us considerable room for manoeuvre, and, in addition, steadily increasing productivity would make it easy to introduce an additional source of revenue into our pension fund.

In Germany and the Netherlands, the American approach has been adopted: introducing a “mixed” system by weakening the pay-as-you-go system (and we are also seeing this trend in France). This forces individuals to turn to supplementary schemes offered by the financial markets in order to try to secure a decent pension. The money invested by individuals represents a profit for the markets, but a high risk for German and Dutch savers and future pensioners, who would be much better served by a pension system like ours.

No. There were no negotiations on pensions with the social partners, i.e. the trade unions and employers, and it is clear that Luc Frieden’s government is following the line of employers and the financial sector very closely.
The ‘Schwätz mat’ campaign was launched without clear objectives and without any commitment on the part of politicians to take its results into account. And it is very significant that Luc Frieden chose, from among all the possible ideas for ensuring the sustainability of our pension system, the one that is most unpopular with employees: raising the retirement age.

It is true that young and middle-aged people will find themselves with significantly reduced purchasing power when comparing their pensions to those of their parents. If Luc Frieden’s reform is adopted and the 2012 reform is maintained, young people will have to work up to five years longer, and those aged around 40–45 will have to work three years longer, in order to receive a pension that no longer guarantees the same quality of life enjoyed by today’s pensioners.

Furthermore, if everyone has to work longer, there will be fewer jobs available for young people entering the labour market. Many of them are already struggling to find stable, well-paid jobs.

But life will also be worse for older people. If the 2012 reform is maintained, the end-of-year allowance and the adjustment mechanism are likely to disappear in one or two years. The disappearance of the end-of-year allowance will have an immediate impact on the lowest pensions, which depend on it the most. The disappearance of the adjustment mechanism will also affect all current pensioners in the medium and long term, who will then have less purchasing power.

The centrepiece of this reform is the gradual reduction of pensions between now and 2052. The LSAP-CSV government introduced this reform in 2012 with the aim of encouraging employees to extend their careers: if they worked longer, this would compensate for the losses in their pensions. However, this reform has not worked at all: rather than working longer, statistics clearly show that people prefer to retire earlier with a smaller pension. The government wants to take this freedom away from the population.

 

A second extremely important but often overlooked element concerns the adjustment of benefit levels (i.e. the amount of money pensioners receive each month) to wage developments.

 

In Luxembourg, salaries change every year due to numerous factors, both negative and positive. They are adjusted for inflation or deflation (through indexation) and increase or decrease in certain sectors. This is why the government reviews the situation every year and determines how they have changed. If salaries have increased, pensions are also increased.

 

This adjustment allows pensioners to maintain their purchasing power. However, there is a strong risk that it will be abandoned in 2028 or 2029 by the CSV-DP government. This means that someone retiring in 2030 risks losing 28% of their purchasing power (during their retirement) over a period of 25 years.

The details are not yet clear, but two things can already be said with certainty:

1. If the 2012 reform is maintained and Luc Frieden introduces his new reform, people who could still count on a more or less decent minimum pension will find themselves below the poverty line during retirement.

2. Introducing ‘targeted social assistance’ for people ‘at risk of falling into poverty in retirement’ (quoting Luc Frieden) will not compensate for the loss of a decent pension. Why not simply defend pensioners’ right to a decent life? There would then be no need to introduce benefits.

3. Life expectancy is no longer increasing significantly. Today, more people are living longer than 50 or 100 years ago, thanks in particular to medical advances and lower infant mortality rates. But that does not mean that our bodies are ageing more slowly. Most people can no longer work as intensively at 60 or 65. And living longer does not mean living in good health. According to Eurostat figures, cited by the Luxembourg government, people live in good health until the age of 60.2 on average (2022 figures). After this age, many people start to experience health problems. Healthy life expectancy depends mainly on social and economic circumstances. People in precarious, low-skilled or physically demanding jobs – in construction, cleaning or care, for example – live on average less time in good health than those with higher education. Forcing them to work longer would be deeply unfair and cruel.

For someone in their 20s or 30s, the debate about pensions may seem distant or unimportant. Today, Europe is preparing for war, artificial intelligence and digitalisation are worrying workers, the housing crisis is worsening and, above all, the planet is threatened by climate change.

But as Lenin said: everything is connected. For example, private pension funds are already seen by some governments as a source of funding for the military. So, isn’t it better to defend our democratically managed public pension system, which prohibits precisely this type of investment?

Isn’t it reassuring to know that a 70-year-old will still be able to pay their rent, or that a 65-year-old couple will be able to finish paying off their mortgage?

And wouldn’t it be fairer to protect older people from heatwaves and other effects of climate change, rather than forcing them to work until the age of 65, sometimes in difficult jobs?

Our social rights are the foundation of a fairer and more humane society. The public pension system is an integral part of this.

For déi Lénk, pensions are not a problem but rather an opportunity. An intelligent, sustainable and fair pension reform is entirely possible and could have benefits for social cohesion and our resilience to the challenges of climate change. Unlike Luc Frieden’s government, we are not looking for a solution in spending cuts and at the expense of the insured. We want to take action on the revenue side and broaden the scope of contributions in a fair manner. Our proposals have been calculated by the IGSS, the public agency responsible for overseeing the economic soundness of the pension system, and will guarantee the balance of our pensions for the next 20 years without affecting benefits or the retirement age.