About to retire
Starting from July 1, 2025, it may be possible: to receive a lump sum from your pension capital directly into your bank account.
What does 'lump sum' mean? And what happens if you choose this option?
You may have already heard about it: taking out a portion of your pension in one go. This could be possible from July 1, 2025. Then you could take up to 10% of your accrued pension in one lump sum. We will explain how this is going to work here.
Explained in 1 minute
Discover in 1 minute what taking out a lump sum means.
Thea opting for a lump sum
"If I retire next year, I want to build a studio in the garden. So then it would be convenient to take out a part of my pension in one go."
- See AlsoI receive a pension from the Netherlands. How does this affect my tax return? | NetherlandsWorldwideThe Dutch Future Pensions Act: Five Key PointsSocial Security Programs Throughout the World: Europe, 2018Salaries tax and social insurance contributions
Anton will not opt for a lump sum.
"I am doing everything I can to grow old healthily. This includes having a stable source of income and staying financially healthy. So I prefer not to receive a lump sum for myself."
This is what you need to know
The law on the 'lump sum' is not yet final. However, if the law is passed, you will have the option to withdraw a certain maximum amount of your pension capital in one go.
The details
To withdraw up to 10% of the pension in a lump sum.
The Lump Sum Amount Act offers you the opportunity to withdraw up to 10% of the pension capital in one go on your retirement date. That sounds attractive. The major advantage of withdrawing a lump sum is the flexibility it gives you when you retire. After taxes, you may spend this money as you wish. For example, for a renovation, paying off the remains of a mortgage, or making your dream trip. But don't count your chickens before they hatch. There is more to it.
More flexibility, but also disadvantages
The lump sum offers you more flexibility, but you also run the risk of financial disadvantages. What those disadvantages are and how big the effect is depends on your personal financial situation. These are the disadvantages:
- Lower pension income. If you opt for a lump sum, the amount remaining for your pension income will be lower. You will then have to manage with less money per month.
- More tax. Please note that you will also pay tax on the lump sum in the year in which you have the lump sum paid out. Possibly even at a higher rate, for example if your income for that year is so high that you end up in a higher tax bracket.
- Loss of entitlement to benefits. Are you currently receiving benefits? If you opt for a lump sum, the amount you receive will be added to your annual income. Due to this temporarily higher annual income, you may lose your entitlement to benefits such as housing and healthcare allowances, either partially or completely.
Lump sum: the basic rules
Have you looked at the pros and cons and does a 'lump sum' seem appealing? Then these are the basic rules that are currently known.
- You may withdraw up to 10% of your pension in one lump sum.
- You can also include a smaller part. For example, 5%.
- By taking a lump sum, the remaining pension capital must not fall below the 'commutation limit'. This means that for your pension capital you must retain at least €592.51* gross per year in pension. (*amount in 2024)
- You cannot combine the lump sum with the choice for a Temporary higher pension. Temporary higher pension means that you receive a higher pension income in the first years of your pension and a lower one in the following years. This option therefore lapses if you choose a lump sum.
Lump sum withdrawal before or after state pension age: difference in tax rate
You may choose to take the entire amount at once on the retirement date. The amount of tax you pay on the lump sum depends on your age. Have you reached the statutory retirement age? Then you pay tax on your income at a lower rate. This is because your employer or paying agency no longer deducts state pension premiums from the month in which you reach the statutory retirement age.
- Example 1: Taking up employment after state pension age
- When Kees is 70 years old and retires, he has by then reached the state pension age. If he opts for a lump sum payment on his retirement date, he will pay the lower tax rate.
- Example 2: Withdrawal before statutory retirement age
- Marjon wants to retire at the age of 65. The lower tax rate applies only from the state pension age. If she chooses to have the amount paid out in one go on her retirement date, she will pay tax at a higher rate than if she had already reached her statutory retirement age.
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Arranging lump sum
Arranging the 'lump sum' is not yet possible. Probably not until July 1, 2025. If the law is passed or if anything changes in the legislation, you can read that on our website.
Need advice on this choice?
Consult an independent financial adviser. Get assistance with your decisions.
Eric, 66 years old
"If I retire next year, I want to pay off the last part of my mortgage. With a lump sum, that should be possible."
Frequently asked questions
With the lump sum option, you can withdraw up to 10% of your previously accrued pension in one go. However, this has not officially started yet. The earliest this could happen is on July 1, 2025, depending on when the legislation is finalized. If your pension starts in 2024, you won't be able to use this option. But you might have other pensions that start after the law is officially in place, so you could potentially use it for those.
Considering this option? Make sure to get proper advice.
- If you want to withdraw up to 10% of your pension in one lump sum, think about delaying your pension until it becomes possible. Keep in mind that July 1, 2025, is not set in stone, and it could be pushed back even further.
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