Lijfrente and jaarruimte: deductible pension saving

Unlike salaried employees with employer pensions, freelancers must build their own retirement savings—and the Dutch tax system does allow you to do it with significant tax benefits. The jaarruimte (annual room) lets you deduct pension contributions directly from your taxable profit. This guide explains how it works, how much you can save, and why your choice between a bank or insurance annuity matters.

What is jaarruimte and why does it matter?#

The jaarruimte is an annual allowance you can use to build a tax-deductible pension via a lijfrente (life annuity). Instead of paying tax on your full profit and then saving what's left, you reduce your taxable profit by the amount you contribute to the annuity. This saves you tax now and builds retirement income for later.

How much can you deduct: the 30% rule#

Since 2023, the jaarruimte calculation became more generous. You can now deduct the higher of two amounts:

1. A fixed amount (around €6,900 in 2025, growing annually with wages) plus a reserveringsruimte (additional room for larger incomes)
2. 30% of your taxable profit (after other entrepreneur deductions like the zelfstandigenaftrek)

Hedge the exact percentage and formula: These numbers change yearly, and the expansion rules have specific thresholds. Always check belastingdienst.nl or a tax advisor for the current year's limits. You can only use what applies to your specific situation.

A worked example#

Imagine your taxable profit (after zelfstandigenaftrek) is €50,000:

• Fixed jaarruimte: ~€6,900
• 30% of profit: €50,000 × 30% = €15,000
• You can use the higher amount: €15,000

You could deduct up to €15,000 in lijfrente premiums, reducing your profit to €35,000 for tax purposes.

Lijfrente: how it works#

A lijfrente is a contract with either a bank (bancaire lijfrente) or an insurance company (verzekeringslijfrente) that promises to pay you a fixed or inflation-indexed monthly income starting at a chosen retirement age (often 65 or 70).

Key features#

• You pay premiums now (deductible from your profit)
• You receive monthly payments later, from your retirement age onwards (even if you live to 100+)
• The capital is locked in — you cannot withdraw it early without penalties
• It is indexed or fixed — some contracts increase with inflation, others stay flat

Bancaire (bank) lijfrente vs Verzekeringslijfrente (insurance annuity)#

Bancaire lijfrente (from a bank):

• You build up capital, which converts to a guaranteed monthly payment at retirement
• Simpler structure, more transparent costs
• Less complex tax reporting
• Usually offered by ABN AMRO, ING, Rabobank

Verzekeringslijfrente (from an insurer):

• You pay premiums to an insurance company that guarantees the payout
• Built-in life and risk coverage (e.g. if you die before retirement, your beneficiary gets the balance)
• Can include inflation protection or waiver of premium if disabled
• Usually higher fees, but more protective

Both are deductible under jaarruimte. The choice is personal: if you want simplicity and low costs, a bank version works. If you want insurance components and inflation protection, an insurer product may be worth the extra fees.

Tax benefits and timing#

The tax saving is immediate:

• You deduct the premium from your profit this year
• Your tax bill drops by roughly 30-50% of the premium (depending on your marginal tax rate)
• The income you receive later in retirement is also taxed as pensioninkomsten (pension income), at normal rates

This is not a complete dodge: you save tax on the way in, but you pay it on the way out. The value is in deferral — you postpone tax to years when you may have a lower income or benefit from lower tax brackets in retirement.

Jaarruimte vs the old FOR (oudedagsreserve)#

Before 2023, the oudedagsreserve (FOR) let freelancers build a reserve on their balance sheet. You could deduct contributions without immediately buying an annuity. The FOR was abolished effective 2023, and you must now wind it down if you still have one.

If you have an existing FOR:

• You must settle it eventually (convert it to a lijfrente, distribute it, or add it to profit)
• Balancing it back to profit triggers immediate tax
• Many freelancers are converting old FOR balances into lijfrentes to spread the tax hit

Read The FOR is gone: converting your old-age reserve for a full breakdown of winding down an old reserve.

How jaarruimte fits into your overall deductions#

The jaarruimte is an additional layer on top of your main entrepreneur deductions:

1. Revenue minus business costs
2. Result minus zelfstandigenaftrek (self-employed deduction, phasing down to €900 in 2027)
3. Result minus startersaftrek (if you qualify in your first 3–5 years)
4. Result minus jaarruimte (lijfrente contribution)
5. Result minus MKB-winstvrijstelling (12.7% SME exemption, around 2025–2026)
6. Final taxable profit × your tax bracket

The jaarruimte reduces step 4 before the SME exemption, so it has a double benefit: you deduct it, and your remaining profit also qualifies for the 12.7% exemption on a smaller base.

• Open a lijfrente with a bank or insurance company before your tax year ends (if possible)
• Decide how much to contribute based on the jaarruimte limit for that year
• Make the premium payment and keep receipts
• Report the jaarruimte deduction in your annual tax return (Box 1 deductions)
• Review your policy annually to ensure premiums align with your profit and retirement goals

The bigger picture: closing the retirement gap#

Freelancers in the Netherlands face a pension gap compared to salaried employees. An employee enjoys an employer pension (often 8–10% of salary). A freelancer gets only the state AOW (old-age pension, currently around €1,200–1,400/month for a single person). The gap is significant, and jaarruimte is one of your main tools to close it. Combined with building a pension as a freelancer, the jaarruimte is your tax-deductible lifeline.

For more on the AOW and the retirement income you'll need, read The AOW state pension and your freelance retirement gap.

Common questions and pitfalls#

• Can I carry unused jaarruimte forward? No. If you do not use it in a given year, it vanishes. Plan ahead.
• Can I withdraw early? Not without heavy penalties. A lijfrente is designed to be locked in until retirement. Only in severe hardship can you break it early.
• What if I die before retirement? Depending on your contract, your heirs may receive a capital sum or nothing. Insurance lijfrentes often include a death benefit. Check your policy wording.
• Does jaarruimte expire when I stop working? Once you cease your business, you cannot build new jaarruimte. Existing lijfrentes continue and eventually pay out at your chosen retirement age.

Frequently asked questions#

Building a pension as a freelancer is not optional—you have no safety net once you stop working. The jaarruimte makes it tax-efficient, and a lijfrente ensures you have guaranteed income for life. The sooner you start, the more time your contributions have to grow. ZZP Belasting can help you track your deductions and plan your retirement savings step by step.

← All articles