Building up a pension with annual margin
Many self-employed people do not build up enough pension and that is of course a shame. Especially since most self-employed people have the annual margin to do so, but do not use it. After all, annual margin allows you to build up pension with tax benefits. And that can make a big difference.
What is annual allowance?
If you do not accrue enough pension, it is smart to build up an extra pension pot yourself so that you can live later as you envisage now. The maximum annual amount you can deposit in such a pension pot is your annual margin. This annual margin depends on your income and how much pension you are currently building up.
The benefits
Do you deposit your annual allowance in a pension account? Then you will not only build a pension for later, but also get tax benefits:
- Tax refund: of the money you pay into a pension account, you may offset it against your income tax. That means you can get up to half back when you file your tax return. Put this amount in a savings or investment account and you will benefit from the so-called return on investment effect.
- Exemption from wealth tax: you do not have to pay wealth tax on the money in a pension account. Not even if you exceed the exempt capital of €57,684 (double if you save together with a tax partner).
Of course, some ground rules apply. For instance, you are not allowed to deposit more than your annual margin and the money you deposit in a pension account is actually fixed until you retire. By that time, you have to buy an annuity with the money to have it paid out. Also, you will then pay income tax on it. How much depends on the total pension income you will receive, but chances are it will be less than now.
Calculate your annual margin in a snap
Fancy going into depth? Then find a calculation below. Would you rather have it calculated for you? root right. Our partner Brand New Day developed a handy tool to calculate your annual margin.
And now for the mathematicians among us, a maths example.
You calculate this year's annual margin (2025) based on what you earned in 2024. You do this by taking a percentage of your gross income and deducting the AOW deductible. The AOW deductible is the amount on which you already receive AOW at the moment you reach pension age. In 2025, this amount is €18,475
Of your income above €18,475, you can use 30% as annual margin. Say: in 2024 you earned €50,000. Your annual margin in 2025 is then (€50,000 - €18,475) * 30% = €9,458. You can deduct this amount from this year's income tax.
Did you accrue pension last year? Then this will also affect your annual margin.
Don't forget your reserve space either
You now know what your annual margin is and why it makes sense to do something with it. But did you also know that you can deposit this retroactively? What if you have been building up too little pension for a long time and have never used your annual margin? If you have not used all your annual margin in the past 10 years, you can still do so in the form of reserve margin. Bear in mind that you may use up to € 42,108 per calendar year in the reserve margin (apart from your current annual margin), so you may only make up the annual margin of the past 10 years.
Reserve space calculation?
To calculate your reserve margin, you follow the same steps as when calculating your annual margin, but do so per year. So instead of doing your annual margin times 10, you recalculate your annual margin each year.
Note: You can therefore use a maximum of €42,108 per year in reserve space. Is your reserve space higher than this amount? Then use the oldest reserve space first so that it does not expire next year.
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