Luxembourg-domiciled funds are distributed in more than 80 countries worldwide, through institutional channels (insurers, pensions, corporate pension plans), wholesale networks (fund platforms, private banks, wealth managers, independent financial advisors), third-party providers and fintech solutions.
Pension funds and insurers are the largest investors in investment funds in the EU and globally. At end 2024, according to data provided by EFAMA Factbook 2025, insurers and pension funds were the largest holders of UCITS (Undertakings for Collective Investment in Transferable Securities) and AIFs (Alternative Investment Funds) by net assets in the EU, with around EUR 4,800 billion, which accounts for 30.6% of total fund assets under management in the EU.
That’s why it is essential for fund promoters and initiators to understand why and more importantly how to set up funds for cross-border pension products.
ALFI promotes best practices and reforms towards efficient and successful pension solutions as well as the development of individual savings account schemes. It also supports the development of digital solutions for cross-border pension servicing and contributes to building an effective framework for international pension service providers. You can find more information about ALFI’s engagement in our most recent Ambition Paper 2030.
Moreover, as an established centre for investment fund management and administration, Luxembourg has a key role to play in supporting pension funds investing into investment funds.
Luxembourg vehicles
Luxembourg has two different structures that allow the establishment of a pension fund:
Société d’épargne-pension à capital variable (SEPCAV)
The pension savings company with variable capital works in a similar way to the SICAV (Société d’investissement à capital variable) investment fund. This vehicle is only appropriate for defined-contribution (DC) schemes.
Association d’épargne-pension (ASSEP)
The pension savings association is suited for both defined-contribution and defined-benefit (DB) schemes. It is able to pay out a lump sum or an annuity and may also pay ancillary benefits such as death in service, disability pension and payments to widows and orphans.
These vehicles can be organised as an umbrella structure: different share classes can be used to separate investment styles (defined contribution plans) or different types of plan (defined benefit and defined contribution schemes), or where differing social and labour law provisions make this necessary.
The Luxembourg supervisory authority regulating both SEPCAV and ASSEP pension funds is the Commission de Surveillance du Secteur Financier (CSSF). ASSEPs and SEPCAVs are governed by the Law of 13 July 2005 implementing the EU IORP Directive, which transposes into the Luxembourg law Directive (EU) 2016/2341 on the activities and supervision of the IORPs (Institutions for Occupational Retirement Provision).
EU cross-border pensions
Cross-border pensions address the complexities of coordinating pension rights across countries and contribute to economic integration. They are crucial for facilitating labour mobility and guaranteeing a fair and adequate retirement income for individuals who live or work in multiple countries. This is especially important in Luxembourg, where nearly half of the workforce consists of cross-border workers.
Cross-border workers are entitled to the same pension rights as Luxembourg residents. The Caisse Nationale d’Assurance Pension (CNAP), the National Pension Insurance Fund, considers all periods of contributions in the EU for the opening of their pension rights which are governed by EU Regulation (EC) 883/2004. In order to receive a Luxembourg pension, one must have contributed for at least a year in Luxembourg and have at least 10 years of total contributions, including periods worked in other EU member states.
At EU level, various cross-border pension fund products are available to investors
Institution for Occupational Retirement Provision (IORP)
A current trend in the pension landscape is the centralisation of occupational pension schemes across Europe in one cross-border institution; that would be an IORP. According to the definition of the European Commission, IORPs are financial institutions that manage collective retirement schemes for employers to provide retirement benefits to their employees. The IORP II Directive (EU 2016/2341, amending Directive 2003/41 EC) sets the framework for an internal market for IORPs, thus facilitating the extension of their cross-border activities in a way that ensures protection and security for occupational pension members and beneficiaries.
Pan-European Pension Product (PEPP)
This voluntary plan is supervised by national authorities and the European Insurance and Occupational Pensions Authority (EIOPA), and can be used as a complement to retirement provisions in the EU, giving citizens the opportunity to save for retirement regardless of their employment status. The EU’s PEPP regulation was implemented in March 2022.
A Luxembourg-based pension fund can engage in cross-border activities anywhere in the European Union as long as it is notified to and approved by the relevant regulator in conformity with the EU Pension Directive.
ALFI supports the development of digital solutions for cross-border pension servicing and contributes to building an effective framework for international pension service providers. Moreover, the characteristics of the Luxembourg legislation allow a high degree of flexibility in pension plan design and the investment of pension plan assets.
Why have a pension fund?
Pension funds play a key role in encouraging long-term savings and helping individuals build a comfortable retirement. They offer a secure and flexible framework for generating investment returns, allowing assets to grow over time within a funded system. With their long investment horizon, individual pension products are well-suited to support long-term financial goals.
In today’s investment landscape, it is important to understand how pension savings - particularly those invested through funds - can influence personal retirement security. One of ALFI’s priorities remains investor protection and education in order to help savers navigate retirement planning.