There are significant tax changes on the way that affect retirement and wealth accumulation. The Future Pensions Act made serious changes relevant to pension accrual, pension supplementation or tax-friendly asset accumulation. These are statutory changes for annuities.
Here are the key updates you need to know and can take advantage of this year, provided you take action soon, by transferring assets from Box 3 to an annuity:
Increased accrual rate
The accrual rate for annuities has been substantially increased to 30%. This means that you can use a larger portion of your income for your pension and wealth accumulation with tax benefits.
Increased annual margin
The maximum annual margin has also increased, with a new maximum income over which you can calculate annual margin of € 128,810. This gives you more room to save tax-friendly for later.
Increased reserve margin
There is more good news, as the reserve space has been widened under the new law, giving you more flexibility to make catch-up contributions for previous years.
What does this mean specifically for you?
These rules impact two important pillars of your financial plan: building wealth in a tax-friendly way and supplementing and making your retirement benefits more flexible.
Building wealth
Investment freedom
Some annuity products, especially bank savings products, offer the option to invest. You can choose from different investment funds depending on your risk profile and investment goals. By optimizing the balance between savings in Box 3 and annuity assets (Box 1), you can get optimal tax benefits.
Annual deposit flexibility
Annuities allow you to decide how much you deposit annually, depending on your financial situation. This gives you the flexibility to save more in good years and less in years when you have less room.
Choice of annuity product
There are different types of annuity products, such as bank savings and annuity insurance. Bank savings are often considered to be more flexible because you can determine your own contributions and usually have lower costs than with insurance.
Using power
When you reach the benefit phase, you have flexibility in how and when you have the accumulated capital paid out. You can choose a lifetime distribution or a distribution over a fixed period of time.
Transfer between providers.
You can transfer your annuity capital from one provider to another if you find better terms or returns. This increases flexibility and competition between providers.
Early termination
Although usually tax disadvantageous, some annuity products offer the option of early termination or withdrawal, which can provide additional flexibility in emergency situations.
Supplementing your pension
If you want to retire early and do so by having your pension start earlier, it will come at the expense of the amount. The annuity is then an excellent way to supplement that portion.
Adjusting to life circumstances
Annuity products can often be adapted to changing life circumstances, such as a change in your income situation, retirement plans or family situation.
Should you be considering strengthening your assets or have a pension gap you want to close, now is the ideal time to use the current annuity structure. By making additional deposits or taking out a new annuity contract now, you can take maximum advantage of current tax benefits.
These are welcome changes that can significantly improve your retirement and wealth accumulation options. However, these benefits are maximized until Jan. 1, 2024 due to the Box 3 rules. While you still have the chance to catch up later through catch-up credits, the cut-off date for assets taxed at 2% in Box 3 is Jan. 1. If you want to take full advantage of the tax benefits, it is important to take action on this now so that you pay less capital gains tax.
Also be aware that tax rates and rules can change, which can affect your annuity savings strategy. It is therefore important to stay proactive and up to date on the latest tax news, but you have us for that. By taking advantage of our annual update call, you can optimize both accrual and benefit and strike the right balance between tax advantage and flexibility.
We are ready to help you with this. Contact us for a personal consultation, where we will go over your situation and map out the best strategy.
Don't wait too long; we still have time now to make an appointment, make the right considerations and take care of the processing. Before you know it, the deadline will have passed and you'll miss this opportunity to save for tax savings.
