Presentation of the technical report of the General Pension Insurance 2022


Claude Haagen with Thomas Dominique, Director of the IGSS, presenting the balance sheet

The Social Code (Article 238(2)) provides that for each insurance period of the general pension insurance scheme, the IGSS prepares a technical report and actuarial forecasts that serve as the basis for determining the contribution rate of the general scheme.

This forward-looking mechanism was reinforced by the pension insurance reform that came into force on January 1, 2013. In fact, the insurance period has been extended from 7 to 10 years and regular monitoring by the IGSS of the assumptions underlying the reform has been introduced and the updated financial curve of the regime. Thus, the first ten-year coverage period following this reform ends this year (2013-2022) and the second coverage period thus begins on January 1, 2023.

This technical report for 2022 therefore traces the situation of the general pension insurance in the current coverage period, i.e. between 2013 and 2022, as well as actuarial projections for the horizon 2070.

It should be noted that this professional assessment relates exclusively to the general system of Book III of the Social Security Code and not to the other systems (special and transitional systems), in particular those of the public service.

The financing system of the general system

The general pension insurance is financed according to a cost-sharing system (employee – employer – state) through ten-year cover periods with an equalization reserve of more than 1.5 times the amount of the annual benefit.

The overall contribution rate, currently 24%, is set at the beginning of each insurance period to ensure the funding of the scheme throughout the insurance period.

The level of 24% has remained unchanged since 1990 as it allowed and still allows to cover the expenses of the system while increasing the reserve of the general system.

Coverage period 2013-2022[1]

Since the reform came into force in 2012, the number of pensioners has increased from 153,080 in 2013 to 194,441 in 2020 and the number of insured persons from 374,925 in 2013 to 461,345 in 2020. These increases are of course also reflected at the level of revenue and expenditure, which increased by 44% and 47% respectively.

However, the general system is still in surplus and the accumulated reserve also generates investment income that contributes to the increase of that same reserve and thus to its medium-term financial balance.

In its technical report, the IGSS analyzes four performance indicators of the general pension insurance:

  • The reserve level
    The provision of the general system as of December 31, 2020 was 23.8 billion euros, equivalent to 4.8 times the annual benefits (the legal minimum limit is 1.5 times). In the period 2013-2020, the reserve increased by 73% (+44% for services).
  • The pure pay-as-you-go premium
    The pure pay-as-you-go contribution simply indicates a theoretical contribution rate that makes it possible to cover the expenses of the general system without having to fall back on the reserve. This premium is set annually by grand-ducal regulation based on calculations by the IGSS.
    Over the 2013-2020 period, the payout premium fell from 21.56% to 22.05%.
  • The load factor
    The cost coefficient is the ratio between the average number of pensions and the average number of affiliated pension providers. In the 2020 financial year, the general scheme had an average of 461,345 insured and 194,441 pensioners, i.e. 42.1 pensions per 100 insured. Compared to 2013, occupancy increased by 3% (+23% insured and +27% residents).
  • The Reserve Return
    The interest on the general actuarial reserve results from the comparison between its net income and the change in its amount. The average return was 5.5

In summary, the four indicators are all positive and show the performance of the system at this stage.

Projections 2020-2070

The basis for the projections is data from the general system and the European authorities (forecasts of long-term demographic developments), whose data are also used for European documents such as the Stability and Growth Program (SGP) and this year’s National Reform Program (NRP).

For its technical assessment, the IGSS uses a baseline scenario and several alternative scenarios, which are detailed in Chapter 3 of the assessment. The projections have the year 2020 as their starting point and will be carried out up to the 2070 horizon.

In summary, it can be said that both contribution income and pension expenditure will increase up to 2070, but due to demographic change, also measured as a percentage of GDP, expenditure will develop faster than income.

The projections enable the determination of “critical events” of the general pension insurance. These are (i) exceeding the total contribution rate by the pure contribution, (ii) reducing the reserve below the statutory threshold of 1.5 times the amount of the annual benefits and (iii) exhausting the reserve. These three events are in the years 2027 (i), 2041 (ii) and 2047 (iii), respectively.

The other alternative scenarios analyzed by the IGSS show the same trends, the years of the critical events are practically identical (1 to 3 years delay for the reserve depletion and 1 to 2 years difference for the exceeding of the threshold, but no change when exceeding the pure contribution).


Overall, the general pension insurance is currently in a comfortable financial situation and has coped with demographic change in the medium term.

In the long and very long term, however, economic, financial and demographic developments must be closely monitored.

Specifically for the next coverage period 2023-2032, the technical report for 2022 shows that the condition according to Art. 238 para. 1 CSS (minimum reserve greater than 1.5 times the annual benefit) is met throughout the period while maintaining a total contribution rate of 24 % taking into account the current reserve, which is 4.8 times the annual benefits.

However, the technical assessment also shows that the total contribution rate can be exceeded in the second half of the coverage period by the pure pay-as-you-go contribution.

Taking into account the elements of the IGSS technical assessment and applying the provisions of Article 238 of the Social Code (minimum provision of 1.5 times), the Governing Council has decided to maintain the contribution rate of the general pension insurance at 24% for the 2023-2032 coverage period.

In addition, it was decided to submit the technical report of the IGSS to the Economic and Social Council in order to analyze, discuss and propose possible ways in the future to ensure the financial viability of the general long-term pension insurance system economic developments in the Grand Duchy.

“Our general pension scheme is financially healthy and will remain so in the years to come. However, the demographic development is similar to that in many other countries and the growth in employment will not be able to compensate for this development. This results in long-term and, above all, very long-term challenges that we must of course face in order to find adequate solutions.” The government has therefore decided, in addition to maintaining the contribution rate of 24% for the reporting period 2023-2032, in order to and Social Council to analyse, discuss and propose ways it sees possible for the future It is important to me that the government and the social partners address this essential issue so that all generations can benefit from a pension system that does this enables i offers sufficient protection”, concludes Claude Häagen.

[1] Since the 2021 financial year is not yet closed and the statistical data for 2021 was only partially available at the time the report was prepared, the data for 2020 was used for this statistical analysis.

Notified by the General Inspectorate for Social Security (IGSS) / Ministry of Social Security

Leave a Comment