Indexation

What is indexation? — Indexation is the process of adjusting the value of financial instruments, wages, pensions or other financial measures to reflect changes in the price level, usually due to inflation. The primary objective of indexation is to maintain the purchasing power of money over time. In simple terms, it ensures that the value of payments or investments keeps up with inflation so that they retain their real value.

What is special about indexation in Luxembourg? — In Luxembourg, a system known as "automatic wage indexation" adjusts salaries and pensions based on changes in the Consumer Price Index (CPI). When the CPI increases by a certain percentage, wages and pensions are automatically increased in line with this increase, with the aim of ensuring that people's purchasing power remains stable despite inflation.

What is the Consumer Price Index (CPI)? — The CPI is a measure that examines the average change in prices paid by consumers for a variety of goods and services over time. It is commonly used as an indicator of inflation. 

Are all wages indexed in Luxembourg? — Most wages in Luxembourg are subject to indexation, but it is not mandatory for independents (self-employed professionals) to index their wages.

How often are wages and pensions indexed in Luxembourg? — In Luxembourg, wages and pensions are usually indexed whenever the CPI increases by 2.5% compared to the previous indexation. This ensures that salaries and pensions rise in line with inflation. 

Synonyms : Adjustment for inflation, Cost-of-living adjustment (COLA), inflation adjustment, price level adjustment, inflation linking, inflation indexing, wage adjustment