Pension or annuity? The new rules offer more flexibility than ever before

The Future Pensions Act (Wtp) has significantly changed the playing field. Since July 2023, the tax rules for pensions and annuities have largely been harmonised. This means more freedom of choice for you as an entrepreneur, employer or employee. Whereas in the past you could only accrue pension through your employer, an annuity is now a fully-fledged alternative. The government wants everyone, regardless of their form of employment, to be able to build up capital for later in life in a fair manner.

1. More flexibility and freedom
A pension for employees is usually laid down in a collective scheme. The amount of the contribution, the time of payment and the form are largely fixed. An annuity, on the other hand, is personal. You decide:

• where you save or invest;
• how much you contribute (within the tax allowance of 30% of your income minus the franchise);
• and when the payments start. This makes an annuity attractive for those who want to maintain control over their own financial future.

2. Equal tax opportunities
The maximum contribution for both pensions and annuities is now 30% of the contribution base. This means that the tax benefits are now comparable. Annuities are therefore no longer the “less attractive” alternative, but a fully-fledged building block of your retirement provision.

3. Choices with impact
In the event of death before retirement age, part of the accrued pension often reverts to the fund. With an annuity, the capital remains in the family: it can be paid out to a surviving relative. There are also differences in payroll tax and employer's contributions, which affect the net accrual.

4. What does this mean for you?
The Wtp offers opportunities to coordinate your pension and annuity more effectively. For entrepreneurs, director-major shareholders and employers, now is the time to review your strategy: how can you build up assets for later in a tax-efficient and flexible manner?