How switching from salaried employment to self-employment affects your pension

When you become self-employed or start working for an employer, it affects the way you accrue your pension. As a self-employed professional (zzp’er) you have to build up a pension yourselves. When in employ, you can rely on your employer. But how does it work if you are a salaried employee and you run your own business on the side? This article will take you through all the main changes.

Entrepreneurs, are responsible for building up their own pension. Employees are not. Make sure to align your various pension plans and pension savings. That way, you can rest assured that you will have enough income to live off when you retire.

About your pension

The Dutch pension system is one of the best in the world. People accrue a state pension (AOW), which everyone gets. And employees build up a pension through their employer. Finally, you can also choose to save for retirement yourself. The latter is especially important for self-employed professionals. Here is what you need to know about your pension savings and the three components of the Dutch pension system, the so-called pension pillars.

Pension pillars

The Dutch pension system consists of 3 elements, the 3 pension pillars. You can save up money for retirement in each of these pillars separately. How you save up depends on your situation. The three pillars are:

  1. The state pension (AOW), a minimum basic pension that everyone gets. The state pension amount depends on how many years you lived or worked in the Netherlands.
  2. Pension accrual in salaried employment through an employer.
  3. Supplementary private pensions. You are responsible for your private pensions yourself.

Calculate your pension savings

In the Netherlands, you are unable to accrue a pension (in Dutch) on the first part of your income. This is the AOW deductible. After reaching your retirement age, you will receive AOW on this part.

The remainder of your income is called the contribution base (premiegrondslag). This is used to calculate the annual margin. The annual margin is the amount over which you can accrue pension with a tax exemption. You can read how to calculate the annual margin in the article Building up a pension.

Employed & self-employed

Are you both employed and self-employed at the same time? Then you will usually accrue pension with a pension fund through your employer. Employers are required to offer a pension scheme. Only when no arrangements are made about this in the collective labour agreement (CAO) does an employer not need to offer a pension. You cannot access the pension you have accrued until you retire.

Check if the pension scheme has a survivor's pension for when you die. Married and registered partners are automatically entitled to a survivor's pension (in Dutch) if it is in the scheme. Do you live together? Then you have to register your partner with the pension fund yourself. Otherwise, your partner may miss out on all or part of your pension. Visit mijnpensionoverzicht.nl (in Dutch) to check your accrued pension and state pension. You need DigiD to log in.

ZZP’ers are free to decide whether or not to build up a pension. You can save for retirement by opening a savings account or taking out an annuity, for example. The Dutch Tax Administration will add your in-employ pension to the private pension you accrue as a self-employed professional. Here are some important things to keep in mind:

Pension deficit

A pension deficit (pensioengat) is a financial shortfall when you retire. It means that you accrued less pension than you could have. In practice, you have a pension deficit if your pension amounts to less than 70% of your most recent salary. Click here to check if you may have a pension deficit.

You are allowed to supplement a pension deficit up to a certain maximum amount every year. You can do so by depositing money into a bank account or by taking out a pension insurance contract like an annuity. The amount you deposit into your account is tax-deductible. As a result, this is a particularly tax-efficient way to save money. The maximum amount you can deposit and deduct from income tax each year is called your maximum annual tax relief (jaarruimte). You only pay tax on the money you save above this amount.

Temporarily pausing your private pension

Do you want to temporarily pause your private pension contributions or buy out your private pension? Entrepreneurs could consider this option if they are set to take a salaried job and accrue a workplace pension. You could decide to accrue a double pension, but you run the risk of having to pay tax if you exceed your maximum annual tax relief. Inquire with your pension provider whether you can pause or buy out your private pension and look closely at the conditions.

Fiscal old-age reserve (FOR)

Were you using the fiscal retirement reserve (FOR, in Dutch) until 2023? The FOR is a still untaxed amount on your business's balance sheet. You can buy an annuity or other insurance product and reduce the FOR by its value. But you do have to have the money for this. You can also leave the FOR in place. Is there still a FOR when your business ends? Then you have to pay income tax on that amount.

From salaried employment to self-employment

Salaried employees are often enrolled in a pension fund. You cannot access the pension you have accrued until you retire, even if you become a self-employed professional. As a zzp’er, you have to take your own measures to build up a pension. You can read more about this in the article Building up a pension.

A number of professions have a compulsory industry pension fund or occupational pension fund. This means that you are required by law to enrol in your industry’s pension fund. 

Check if the pension scheme has a survivor's pension for when you die. Married and registered partners are automatically entitled to a survivor's pension if it is in the scheme. Do you live together? Then you have to register your partner with the pension fund yourself. Otherwise, your partner may miss out on all or part of your pension. Visit mijnpensionoverzicht.nl to check your accrued pension and state pension.

From zzp'er to salaried employment

You stop being an entrepreneur and start working as an employee. Then you usually start building up a pension through your employer. This is a second-pillar pension. You can continue to accrue pension with a current private pension provision or savings product according to the rules of the pension product. Check whether your total accrual stays within the tax exemption. Anything above that is non-deductible. Get help from an independent financial adviser (in Dutch) or pension consultant (in Dutch) if necessary. Important considerations:

Annuity

Do you have an annuity? You are not allowed to convert annuities into a workplace pension. You are, however, allowed to buy out your annuity up to a certain amount (in Dutch). Have you accrued more than the maximum amount? Here is what you can do:

  1. Stop funding your annuity. The annuity remains, but you stop depositing contributions. The annuity will continue to grow with interest until you retire.
  2. You continue funding your annuity. The tax benefits you had as a zzp’er no longer apply.

Private savings

Did you save money in an open or locked savings account? If so, you may have to pay taxes in Box 1 or Box 3:

  • With a locked savings account, you cannot access your money during the agreed term. You cannot withdraw any funds, but you can deposit money. Money you deposit into the bank account is tax-deductible. The balance in your locked account is exempt from tax. When it is disbursed, you pay taxes on it in Box 1.
  • Do you have an open savings account? If so, you can withdraw money from the account whenever you please. The Dutch tax authorities will add the balance in your open account to your Box 3 assets. This is the part of your income that you pay taxes on.

Fiscal old-age reserve (FOR)

Were you using the fiscal retirement reserve (FOR) until 2023? The FOR is a still untaxed amount on your business's balance sheet. You can buy an annuity or other insurance product and reduce the FOR by its value. But you do have to have the money for this. You can also leave the FOR in place. Is there still a FOR when your business ends? Then you have to pay income tax on that amount.

For more information about pensions, visit the websites of Nibud (in Dutch) and Wijzer in geldzaken (in Dutch).