Private pensions in the Netherlands (also called supplementary pensions) are pension products or investments that are typically used by people who cannot contribute to pension funds. They allow them to store up additional retirement savings on top of the state pension, and take advantage of related tax breaks.
Private pensions are not mandatory. Indeed, since the cover provided by pillars one (AOW pension) and two (pension funds) is near-universal, comparatively few residents of the Netherlands see the need to add a third-pillar product to their portfolio. However, they remain a crucial financial instrument for some people.
Types of supplementary pensions in the Netherlands
There are many different ways you can supplement your pension in the Netherlands, including:
- Special pension savings accounts (pensioensparen) and retirement annuity contracts (lijfrenteverzekering)
- Shares and other investments
- Life insurance
- Property investments
Insurance companies and banks in the Netherlands offer a range of different private pension products to suit different living and working situations. If you are interested in putting aside extra retirement savings, you can explore any of the options above.
This page focuses primarily on special pension savings accounts and retirement annuity contracts.
Pension savings accounts & retirement annuity contracts
Retirement annuity contracts (lijfrenteverzekering) and bank or pension savings accounts (bank/pensioensparen) are two similar types of private pension savings plans in the Netherlands. They are both private pension products where an individual sets aside money for retirement, and takes advantage of tax benefits in the meantime.
Retirement annuity contracts (lijfrenteverzekering)
Retirement annuity contracts are the “classic” form of private pension saving. While they experienced a dip in popularity in the early 2000s, they have since been making a comeback.
Very simply put, an annuity contract is a kind of insurance. You deposit a monthly or annual amount, and when you retire you receive the money back as a regular payment. You can either choose a fixed retirement benefit when you take out the contract, or have your contributions invested and opt for a variable benefit upon retirement (the value of your investments could go up or down).
Annuity insurance products are usually paid out for life - so you will receive your benefit for as long as you live, even if the total benefit is actually higher than the premiums you paid in during the contribution phase.
If you die, the money you have saved up goes to the insurance company, unless you have purchased an add-on that allows for your money to go to your surviving dependents.
It’s also worth noting that, since they are insurance and not savings products, annuities are not protected in case of your chosen insurance company going bankrupt.
Bank savings (banksparen)
Also known as pension savings (pensioensparen) or a banking annuity (bancaire lijfrente), bank savings accounts have been on offer in the Netherlands since 2008 as a counterpart to annuity insurance products. They are generally considered to be simpler (and sometimes offer better returns) than annuity insurance.
With a bank savings account you deposit an annual amount into a special savings or investment account. It is up to you whether you would prefer to simply save your money and accrue interest, or invest a portion (or all) of your savings in stocks, shares and other financial products.
When you retire, you receive your money back in the form of a regular payment over a period of time predetermined by you (anywhere between five and 30 years). It’s worth noting that a lifelong pension is not guaranteed by a bank savings account - the maximum payout period is 30 years.
However, if you die, the money that you have saved up automatically goes to your surviving relatives. On top of that, bank and pension savings plans are protected up to the value of 100.000 euros, meaning your money is safe even in the event of a company going bankrupt.
Contributing to a private pension
With both annuity contracts and pension savings accounts, you deposit a predetermined amount each month or year to create a pot for retirement. To encourage saving, the Dutch government provides tax advantages - but these also come with several rules.
Tax advantages for private pensions in the Netherlands
Both retirement annuity contracts and pension savings accounts offer significant tax benefits during the contribution period:
- All of your contributions to your private pension plan are tax-deductible, saving you money on your tax return
- Any capital or stocks / shares held in a private pension account are exempt from box 3 wealth taxes
Pensioentekort & jaarruimte (pension savings allowance)
It’s important to note that the above tax savings only apply if you keep within your pensions savings allowance.
The Dutch tax authorities determine an annual maximum that each individual may contribute to their pension savings (including both pension funds and private pension plans). If your annual contributions fall below that maximum amount, then you are considered to have a pension shortfall (pensioentekort) and can deposit additional money into a retirement savings account.
The difference between what you have already paid and your maximum allowance is known as your “annual space” (jaarruimte). You can use this calculator from the Belastingdienst to work out your jaarruimte. Interestingly, this allowance also rolls over. So if you haven’t made use of your full jaarruimte in previous years, you can combine them together to get a larger allowance in any given year (up to a maximum of 42.108 euros plus your regular annual space in 2025). This is known as your “reservation space” (reserveringsruimte).
Withdrawing your private pension
Annuity contracts and private pension savings accounts can generally only be withdrawn as a regular income. Depending on your provider, you can normally choose whether to receive this monthly, quarterly, or annually. It is not usually possible to withdraw all of the money at once as a lump sum.
You can also choose to save with one provider, and then use the savings to purchase a pension income with another provider when you reach retirement age. As this is quite a complicated process and an important financial decision, it’s worth consulting with a financial advisor to discuss the implications of this.
Taxation of private pension pots
The trade-off for the tax benefits you received during the savings phase is that when the pension pot is paid out, it is subject to income tax, but generally at a lower rate.
Can I cash in my pension account early?
Generally, pension accounts only mature on the date you choose when you open the account. Usually, this is the date you reach state pension age. In theory, it is possible to push this back by up to five years, but you should speak with your pension provider to discuss the options open to you.
It is possible to withdraw the money early, but to do so would not make financial sense: as the money is intended to be saved for a retirement, the government may impose a kind of fine (known as “revision interest” or Revisierente) if you withdraw your money early. This amounts to 20% of the total amount, plus income tax.
Private pensions & moving abroad
One of the disadvantages of private pension plans in the Netherlands is that - while they offer great tax incentives - if you do not plan to stay in the Netherlands long-term, you may run into difficulties if you move abroad.
If you move to a country outside the European Union/European Economic Area, in most cases you can keep your pension savings account or annuity insurance plan open and only cash it in when you retire.
The Netherlands has agreements with some other non-EU countries that might allow you to maintain your private pension account after relocating, but with many countries you might have no choice but to close your account. If you are not planning on staying in the Netherlands long-term, it’s really important to discuss your options with a private pension provider or financial advisor before opening the account, to understand whether it is the right option for you.