Video series: ‘Sofa talks’ about property – tips for first-time buyers

I think you start by asking yourself: where do I want to be, what have I already built up and how does that relate to my current income and expenses? In the Netherlands, we always talk about a decent pension being 70% of your latest income. But is that how much you’ll actually need?

It’s quite an old rule of thumb. You should also, or instead, look carefully at what expenses you’ll have once you retire. And then what really matters is how you plan to spend your golden years. Are you going to travel the world? Or stay at home and do crossword puzzles? These are two options with completely different financing needs.

Everyone who lives in the Netherlands builds up a state pension: 2% per year. So, the number of years you’ve lived here affects how much your state pension will be. The state pension is tied to the minimum wage, so it will not necessarily be enough to see you through your old age. If your employer offers you a pension plan, it makes sense to take them up on it.

Employer pension plans can vary quite considerably, so even if you’re using a pension plan, you might not be building up enough towards the pension that you’ll need when you retire.

It’s best to assume that you do, since that’s the case for 9 out of 10 people. The most important thing is to act as quickly as possible so you have enough time to correct it.

There are three ways to do it. The first is to make use of government tax schemes. You can reduce your tax by deducting any payments that you make into an annuity account from your income.

Secondly, you can choose to simply save using a savings account, just as you might do for other things you want to save up for in the future. You can also start paying into an investment account.

And thirdly, you can consider paying any debts off, such as your mortgage. In most cases, you can pay 10% off without any extra charges. That will help you to reduce your outgoings in the future.

Let’s start with the pros. The government helps you build up a pension by offering tax relief, as you can deduct deposits that you make into an annuity account or an annuity investment account from your income. And the amounts involved are much greater than before, which really helps.

The deposits you make into that account are tax-exempt, and you only pay tax when you start withdrawing your pension.

The government has amended the rules on a number of occasions, but not necessarily to our detriment. Recently, the amounts for tax deduction have been considerably increased. On the other hand, the flexibility of what you can do with the capital you’ve built up has been reduced somewhat. However, legislative changes are only applied going forward and not retroactively. This means that when you make deposits towards your pension, the rules as they stood at the time you made the deposit will always apply to that part of your capital. And if you’re no longer happy with what you can do with your pension capital, you can just stop making deposits and simply decide what you want to do from one year to the next.

You can do a pension check at abnamro.nl. Once you enter your DigiD details, it will show the information from your pension provider. You can also visit mijnpensioenoverzicht.nl. This also shows all the information about your state and private pensions: what you have built up so far and what you will receive in the future.

If you have any questions about your finances, or you’d like to talk to an adviser, go to COACH and use one of our exclusive contact options for Preferred Banking clients.