Financial planning


Dutch pensions


Pensions are often called the most complex personal finance subject.


What is a pension?

A pension is a way of saving money to ensure a comfortable retirement. It can have major tax benefits.


There are three main types of pensions:

  1. The State Pension or AOW.
  2. The Company / Occupational Pension
  3. The Personal Pension or lijfrenteverzekering or retirement fund

How does a personal pension work?

An individual can save money for his retirement by giving it to an insurance company who invests it. This investing should increase its value significantly over time. To encourage the individual to save there are certain tax benefits. After retirement the fund is normally used to buy a guaranteed income - usually for life.


How does a company / occupational pension scheme work?


Much the same as personal pensions except they're organised by the pension saver's employer. (So they're not available to the self employed or those whose employers don't provide one).


There are different contribution limits to personal pensions.


How does the State Pension work?


The State pension is very complex and doesn't pay very much. There's more detail in the section on the Social Security.


Pros and cons of pensions


  • One can save up for your retirement.
  • Possible tax benefits.
  • The pension is managed for the pension saver.
  • Also the pension fund is free of "capital gains tax", the so called "vermogensrendementsheffing" in Box 3.




  • Assuming the pension which is chosen is flexible and has reasonable charges a major disadvantage is having money locked away until retirement (from 50+). There's no way out. However this could also be seen as an advantage.

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Taxation in Box 3