Independent and pension

What are my options?

Not all independents save for their pension, because it is expensive, difficult, the offered products are unclear and it is by no means certain what you will be left with in the end. To offer you some grip on the various options concerning your retirement, we have made a list with the forms for saving for your pension. Not only the various forms are covered, but we also explain what age suits what form of saving. There are of course alternatives to saving. You can read more about that here.

1.Bank savings

Bank savings is gaining popularity because of its simplicity. Saving with a bank is a way with which you set aside money on a special bank account, over which you do not need to pay taxes. The disadvantage of bank saving is that you can’t withdraw money in the meantime. This could also be seen as an advantage, because you can’t be tempted to withdraw money that you want to set aside for later. Furthermore, there are no additional costs for policies when saving with a bank. Another benefit.

2.Annuity scheme

The principle is the same as with bank savings, You set aside money each month or quarter in the form of an annuity premium. This money, different than with bank savings, is not placed in a savings account, but is set aside with an insurance company. The disadvantage of this is that you must pay the premium and the costs. The great advantage is that you are guaranteed of a life-long benefit. Each year after you retire you will receive a benefit through the annuity scheme, even in the unlikely event that you live up to a 120 years old. The premium that you pay now are deductible in the income tax (box 1), the benefits you receive after you retire are taxed as income in box 1.

3.Fiscal retirement reserve (Dutch: Fiscale Oudedagsreserve/ FOR)

The FOR is a facility especially for entrepreneurs that ensures that you set aside 10.9% (with a maximum of €9542,-) of your profit on a savings account and you do not need to pay income taxes over this amount just yet. On the moment you retire and the FOR is released, you will need to pay taxes over the total sum of the saved amount (dependent on the moment of retirement an additional annuity premium deduction, if you cease your enterprise). An advantage of the FOR is the extended tax payment, which in itself is also a disadvantage. Because, the more you save, the more you will have to pay in the end.

4.‘Regular’ saving

Just opening a savings account (whether or not linked to an investment account) and saving money on this account for later is of course also an option. The advantage with this is, is that it is very flexible. You always have access to your money and there are not costs for premiums or other issues. The disadvantages are that your pay for the saved taxes in box 3 (income from savings and investment) if your wealth is larger than €21.139. The disadvantage is the flexibility as well, there is no pressure to save money, which increases the risk that no money is deposited to the savings account.

5.Self-employed professional- pension savings fund (Dutch: ZZP-pensioen spaarfonds)

As of the 1st of December 2014 it is possible for independents to register with a zzp-pensioenfonds. It is up to you what your contribution will be, what benefit you want on the moment you retire and how long the benefit will go on for. The benefit can start between the age of 60 and 70 This start can be determined by you, yourself. An investment fund is dependent of your age, because each age group has their own separate risks. The expenses are dependent on your contribution.

6.BRIGHTNL

If you save for your pension as an independent through the saving fund of BRIGHTNL, you are also a direct shareholder of BRIGHTNL. You determine the contribution in the fund. The benefits after your retirement will be on a monthly basis, you can choose through which insurance company these benefits will take place. The expenses are set per year, and are not dependent of your contribution. The paid premium is deductible, which means that you pay less taxes now because your fiscal income is lower. A disadvantage of BRIGHTNL and the zzp-pensioenfonds is that they are not very flexible and are aimed for a longer period and your money is truly set aside.

What steps fit your age?

Below 40

If you are under 40, you usually have more than  thirty labour years ahead of you and your pension is far away. This does not mean that it is not important to start saving, Because it are these years in which interest accumulation (interest over interest) are doubly important. Bank saving is a good option for this. This option is more flexible and because you can keep this up for a long time, the interest can be significant over a number of years.

Over 40

Perhaps you have already built on your pension in previous employments. As someone over 40 years old it is a good time to review how much you have built up and what your wishes are for your pension. Because you still have at least twenty years of labour years to go, the options we mentioned for ‘below 40’ are also still applicable.

Over 50

If you work in employment as someone over 50 years old, you will have accumulated quite some pension. As someone over 50 years old, it can be advisable to consider how long you want to continue working and what is still required financially to achieve this goal. Issues that also play a part in this are: excess value of the house, shares and prospective inheritance.

Over 60

If you are someone over 60 years old, your retirement is quickly approaching. Whether you have built-up a lot or not that much, not a lot can be changed about that. If you do have money to spend, It is up to you how you want to spend it, depending on your wishes. An option for example is to (partly) pay off a mortgage or saving in box 3. A pension insurance or different policy is a less advantageous alternative at this age.

Source: Personal Finance, published by the FD #2, 2014.