Annual Pension Allowance (Jaarruimte)
The jaarruimte (annual pension allowance) is the amount you can contribute each year to a pension annuity product (bank savings or annuity insurance) with tax benefits. It is intended to supplement a pension shortfall – if you're not building up enough pension through your employer, or if you're a freelancer with no employer pension at all. The jaarruimte is calculated using a formula based on your premium income and your already accrued pension (pension growth, factor A). If you didn't use the jaarruimte from previous years, you can still use the unused allowance going back up to 7 years – this is called the reserveringsruimte (reservation allowance).
Example
You earn €60,000 and build up limited pension through your employer (factor A = €8,000). Your jaarruimte is then approximately: (30% × €60,000) - €8,000 - a franchise = about €4,500. You can deposit this amount tax-deductibly into a pension annuity product. At a 36.97% tax rate, this yields €1,664 in tax savings.
Why does this matter?
Especially for freelancers and people with a pension gap, the jaarruimte is a powerful tool. You pay less tax now while simultaneously building your pension. Don't forget: your jaarruimte expires after 7 years, so check annually whether you have unused allowance.