No more FOR, what can you do?

As of 1 January 2023, entrepreneurs can no longer build up a fiscal retirement reserve (in Dutch: 'fiscale oudedagsreserve', FOR). If you have already set aside money in a retirement reserve, you can leave the money where it is, or transfer it to another pension product. If you want to start building up additional pension, there are several options. Make a decision now about how to build up a pension, because you may not be able to live on the state pension AOW alone.

What is the fiscal retirement reserve (FOR)?

The fiscal retirement reserve FOR applies to entrepreneurs who pay income tax (as opposed to corporate income tax, or 'vennootschapsbelasting'). Owners of an 'eenmanszaak' (sole proprietorship), 'vof' (general partnership), 'maatschap' (professional partnership), or 'cv' (limited partnership) pay income tax. Around a third of all entrepreneurs in these categories make use of the FOR. 

Even though it is called a retirement reserve, the FOR is not a pension. If you save for your pension, you set money aside for after your retirement. The FOR is actually no more than a tax deferral for part of your company profit. You can set aside this untaxed part of your profit in a blocked bank account, or purchase an annuity insurance. But you do not have to. Many entrepreneurs end up using the money in their business.

This is what changes

As of 1 January 2023, you can no longer set aside money using the FOR. If you have already accrued a retirement reserve, you can settle it based on the old rules. 

What can you do with your existing FOR

You can leave the accrued amount in place. It does not replace a pension. One option is to start saving for your pension in a bank account, or buying an annuity. The amount you pay into your annuity or pension savings account is deducted from your FOR. This amount then counts towards your profits, but the amount paid into your annuity or pension savings account is deductible for tax. This means you do not have to pay tax over this money at the time that you transfer it. Once you start using the money, after your retirement, tax will be levied on your annuity and bank savings payments.

You can opt to turn your FOR into an annuity or savings account up until the moment you end your business. If you do, you need the money in cash. Do you have money left on your FOR balance when you end your business? In that case, the FOR amount will be added to your profit of that year, and you will have to pay tax over it.

Types of pension products

As a business owner, you can build up a pension to complement your state pension (AOW) in several ways. Or, if you are already enrolled in a compulsory pension fund, extra pension. You can save money yourself, invest, open a bank savings account, or buy a pension product from an insurer or other supplier.

Get help from an independent financial adviser (in Dutch) or pension adviser (in Dutch), if you are not sure what to do. Or compare products and savings plans to find out what the return on your investment will be. This article lists a number of alternative ways to save for your pension. You can also combine different methods for greater yields and flexibility.

1. Save privately or invest

If you save privately, part of your deposit is exempt from tax. This is called the tax-free allowance. Anything over that amount is taxed in box 3 of your income tax. A disadvantage of saving privately is that your capital grows very slowly if the interest rates are low. Investment saving is more risky, but may yield higher results in the long run. 

2. Bank savings account or fiscal pension savings

You may deduct the amount you save monthly for your pension up to a maximum amount (in Dutch). You do not pay tax on your bank savings account balance in box 3 of the income tax. You decide when to start the periodical payments. You can choose any date up to 5 years after the account holder reaches the state pension age. Until that time, the money is blocked.

3. Save with a commercial pension provider

Commercial providers such as insurance companies offer several pension products, for example: 

• annuity insurances;
• single premium insurance policies;
• pensions for self-employed professionals (zzp'ers). 

A pension for self-employed professionals doubles as a buffer for incapacity for work. If you fall ill or have an accident, you can use the money in the pension to live on.

Pension is important

Have you not yet started building up an additional pension? Calculate if you need more than AOW (in Dutch) to continue living the way you are accustomed to after you retire. Your age makes no difference. The sooner you start making provisions, the easier it will be to build up a pension that enables you to live in comfort later. Or even retire sooner. 

Want to know more about building up a pension?

Read more about pensions for business owners in the KVK Book of Finance, chapter 6.6. Do you want to know how much pension you have accrued already? You can check this on Mijnpensioenoverzicht.nl.