A retirement annuity provides a guaranteed monthly or annual income for the time after your retirement. The annuity is usually funded years in advance, either in a lump sum or through a series of regular payments. The cash reserve may return fixed or variable cash flows later on. Typically, an annuity has large up-front costs and early withdrawal penalties. The great benefit is that when you retire it provides extra income. Annuity savings are taxed after the statutory retirement age at a significantly lower income tax rate. 

Dutch tax office conditions

The Dutch tax office recognizes a retirement annuity (lijfrente) if the retirement payment amounts are not predetermined. A retirement annuity (lijfrente) is not recognized if the amount payable upon retirement is determined upfront either as a lump sum or periodic payment. You may however agree upon a minimum retirement payment amount, leaving room for a higher payout due to capital gains. 

Taxation of retirement annuity (lijfrente)

Insurance premiums and deposits for a retirement annuity (lijfrente) are tax deductible if the retirement annuity is managed by a recognized insurer, bank or fund manager. 

You should be the beneficiary of the periodic annuity payments (at least one payment per year, with equal payment periods and fixed and stable periodic amounts). 

You pay (reduced) income tax on the annuity payments received upon retirement. 

If you withdraw money or close the retirement annuity early, you will be taxed on the fund deposit withdrawn. Additional penalty charges (revisierente) may be charged. 

Note: if your retirement annuity agreement states that you are receiving a net payout scheme, then premiums are not tax deductible. 

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