You can save for your pension in different ways. The pension system roughly consists of three pillars. These pillars form the foundation of the pension system in the Netherlands. The first pillar is the form of pension issued by the government, namely the AOW and the ANW. The second pillar consists of the form of pension provided by the employer. The third pillar is what you have influence on. The annuity is part of the third pillar of the pension system.
What does an annuity mean?
You can save for your pension in different ways. The pension system roughly consists of three pillars. These pillars form the foundation of the pension system in the Netherlands. The first pillar is the form of pension issued by the government, namely the AOW and the ANW. The second pillar consists of the form of pension provided by the employer. The third pillar is what you have influence on. The annuity is part of the third pillar of the pension system.
Annuity
A definition of annuity according to the Dikke van Dale is a lifelong periodic payment that is obtained as a form of life insurance . That probably won’t make you any wiser. What matters is that you have an annuity to provide income for a certain period of time after retirement to live on.
Phases of an annuity
The annuity has two phases:
[List]the accumulation phase; and the distribution phase.[/List]
Construction phase
In the accumulation phase you pay the premium for the annuity. You can roughly do this in two ways, namely with an insurance company or with a bank. With your deposits you create a fund from which you will receive income after your retirement.
You can have two things done with your premiums, namely either invest with them or save with them. Depending on your choice to accrue your annuity with a bank or an insurer, the method of accrual will differ.
Distribution phase
As soon as you can retire, the payment phase of the annuity will commence. At that moment you have a capital with which you can buy a benefit. You can do this either with a bank or with an insurer.
The insured form of annuity in the payment phase offers you a lifelong benefit. The risk that you will live a long time then lies with the insurer. This certainly has an impact on the amount of benefits you will receive.
The bank annuity in the payment phase has a minimum payment phase of 20 years. As soon as the pot is empty, the payment will stop. Then if you live a long time, you have the risk. The risk is that you will no longer receive benefits after a certain age.
A choice between the two forms requires a careful consideration on which you will certainly have to spend time and money, since you can only make the choice once.
Tax rules accrual annuity phase
From a tax perspective, you must remember that an annuity is a deductible item in the accumulation phase and that the benefit is taxed in the payment phase. But as with so many rules, you must pay close attention during the accrual phase whether you continue to comply with the rules regarding deductibility of the premiums paid.
If you do not pay close attention, you may end up paying premiums. These premiums are not deductible, but you do have to pay taxes during the payment phase. You will then have had no tax benefit and will have to levy taxes. Fiscally this is terrible. You are imposing double taxation on your hard-earned money.
The main rule for deductibility of annuity premiums is that you have a pension deficit. According to the legislator, the criterion for a good pension is that you accrue 70% of your last earned salary in pension entitlement. If you accrue less than 70% of your salary in pension entitlements, you are faced with a pension deficit.
If you have discovered that you are accruing a pension deficit, you have the option to supplement this deficit by paying annuity premiums.
Do you expect a pension deficit?
If you are not building up a pension, started working late, drive a lease car or work part-time, you probably have a pension deficit. You may also be faced with a pension deficit due to the type of pension scheme of your employer. In short, it is wise for everyone to check whether there is a pension deficit.
Self-employed and pension
As a self-employed person, you cannot build up a pension yourself, like an entrepreneur with a private company. You can also no longer participate indefinitely in the pension scheme of your previous employer. In short, you as a self-employed person would do well to have your pension looked at. As a self-employed person, you can also build up a pension through annuities.
However, it is important to check every year what the maximum deposit may be in order to deduct your premium. In addition, it is wise to look carefully at the way in which you will build up the annuity capital, namely through an insurer or through a bank.
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