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The Dutch pension system

The Dutch pension system. The third pillar. Capital insurance Capital → Contributions Box III → Fictious 4%. Annuity insurance Annuities Box I Pension shortage. The third pillar. The annuity insurance. Main goal of an annuity 70% final pay fiscally faciliated

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The Dutch pension system

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  1. The Dutch pension system The third pillar

  2. Capital insurance Capital → Contributions Box III → Fictious 4% Annuity insurance Annuities Box I Pension shortage The third pillar

  3. The annuity insurance • Main goal of an annuity • 70% final pay • fiscally faciliated • shortage in pension (pension gap)

  4. The annuity insurance • Art. 1.7, section 1, Personal Income Tax Act: (PITA) “A claim based on a life insurance agreement which contains fixed and steady periodical payments and ends at the latest at decease. It cannot bougth of, alienated, sacrificed of formally act as an object of security……”

  5. Art. 1.7, section 1, Personal Income Tax Act: • A life insurance • exeptioncaptital insurance due to an accident (box I → box III (5.10 PITA)) ↓ (< €6389 (2006)) death • fixed and steady • Deprecition and inflation (approx. 2%) • 75% ? • periodical payments • Sequence • 1% chance ( 3.125, section 3: exeption < 30) • bought of, alienated, sacrificed, act as an object of security → taxation + revision fine

  6. Permitted forms of annuity insurances • 3.125 Personal Income Tax Act: • Old age annuities • Surviving relative annuities • Temporary old age annuities

  7. Old age annuities • Art. 3.125, section 1 PITA • ← 70 • Life long annuity

  8. Surviving relative annuities • Art. 3.125, section 1, character b, PITA • Deceise dutiable taxpayer partner (included) • Temporary or lifelong? • Other relatives • < 30

  9. Temporary old age annuity • Art. 3.125, section 1, character c, PITA • Starting date ? • How long ? • Maximation ?

  10. The deductible contribution • Annual space ║ (17% x (IB – OAPA) – OAR – 7,5 A – BSA IB = Income Base (max. € 148.579) OAPA = Old Age Pension Act (franchise, € 10 816) OAR = (fiscal) Old Age reserve 7,5 A = 7,5 times accrual on pension (a year) BSA = Blocked Savings Account

  11. Annual space • An example: Taxable income € 50 000 Pension based salary € 40 000 (art. 18G PITAjo.10b uitv.besl Wages Tax Act) Build up percentage 2,25% Old age franchise (on pensions) € 11 300 Annual space: 0,17 x (€ 50 000 - € 10 816) – 7,5 x 2,25% x (€ 40 000 - € 11 300) = € 1819

  12. The deductible contribution • Reservation space • 7 foregoing years • eighth year ?? • 17% of Income Base (max. € 6 389) • Critic: Why maximated and why only 7 years ?

  13. Annuity related facilities • Fiscal Old Age Reserve (FOR) Art. 3.68 PITA → • Entrepreneur • > 1225 hours • 12% profits • Max. € 11.050 (2006) • Max. value of company minus contributions annuity insurance (art. 3.70, section 1, character a, PITA)

  14. Annuity related facilities • Cease of company profit annuity (stakingslijfrente) • Hidden reserves and goodwill • Maximum € 405 214 (> 60) Discrimination ? € 202 612 (> 50) € 101 311 (rest) • Imputation: • Pension Wages Tax Act • Fiscal Old Age reserve • (nominal) contributions annuity insurance • Conversion in the past

  15. The Hungarian third pillar • Voluntary contributions • Legal forms of annuities 1) The annuities are paid to the end of his/her death life; 2) an annuity can be paid to his/her heir (beneficiary) for a time agreed upon (a certain period) in advance or paid to the member until the end his/her life. The beginning period is fixed; 3) an annuity paid to a member until the end of his/her life, and after that to his/her heir until a specific date (a certain period as well as an fixed end period); 4) two or more annuities until death, and payments while at least one of them is alive (a joint survivorship life annuity) • Old age annuity • Annuity insurance on two lives • Surviving relatieve annuity Dutch legislated annuity insurances • Two old age annuities • 30% write off Hungaria PITA (employees)  52% progressive PITA • Max. monthly minimum wage (employers)  contributions dutiable taxpayer

  16. The end • Questions / remarks ?

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