How does reservation space work?

Pension comes in various forms. The Dutch system rests on three main pillars and a fourth informal pillar. These pillars are the AOW (1st pillar), the supplementary pension (2nd pillar, also known as collective) through the employer, individual pension provisions (3rd pillar, also known as annuity), and private investments or assets (4th pillar).

However, not everyone in the Netherlands has a pension and even if they do have a pension, they do not always build up enough. This can cause a pension shortfall (pensioengat). The government stimulates additional pension accrual with annual allowance (jaarruimte) and carry-forward allowance (reserveringsruimte).

Below, we clearly explain what these terms entail and how the carry-forward allowance works.

‍

What is carry-forward allowance and when does it apply?

Carry-forward allowance (also known as catch-up allowance) is the unused annual allowance from previous years that you are still permitted to use. In other words, if you did not use (fully) your annual allowance in previous years – for example, because you did not make an annuity contribution that year – you may still catch up on that missed amount in a later year.

This applies to everyone who has incurred a pension shortfall in the past by not using the annual allowance at the time. The carry-forward allowance gives these individuals an extra opportunity to still catch up on the missed pension accrual with tax support.

‍

When does it apply?

Carry-forward allowance automatically arises if you have not used your annual allowance from previous years. You do not have to apply for this separately; it is simply the sum total of your unused annual allowances from the past years.

For example: if you had annual allowance in 2022 and 2023, but did not contribute any or sufficient annuity premium, then you have a carry-forward allowance in 2024 equal to the size of those unused amounts.

Please note: you only have annual allowance (and thus carry-forward allowance) if you actually had a pension shortfall. If you do not have a pension shortfall (for example, because you were already building up the maximum pension through your employer), then there is no annual allowance and you do not accrue any carry-forward allowance either.

‍

How is the carry-forward allowance calculated?

The carry-forward allowance is calculated as the sum of unused annual allowance over a series of previous years. You are currently allowed to carry back the annual allowance for the past 10 years. Specifically, this means that in 2025, the annual allowances from 2015 up to and including 2024 are eligible: all allowance from those years that you did not use adds up to your carry-forward allowance in 2025.

Step-by-step calculation

First, you calculate your annual allowance for each year separately. The annual allowance in a given year is determined on the basis of your income and pension accrual in the previous year. This involves looking at your premium basis (gross income – AOW deductible) and how much pension you were already accruing through work (if you did so). This is called the Factor A and can be found on your Uniform Pension Statement (UPO).

‍

The formula for 2025 is as follows:

Annual Allowance = 30% × (income in 2024 – the AOW deductible) – (6.27 × Factor A of 2024). (If you did not accrue a pension through work in 2024, Factor A = 0 and that term is omitted.)

‍

If you also want to calculate the annual allowance for previous years, you must use the following percentages:

2015 up to and including 2022: 13.3%

2023 up to and including Now: 30%

‍

Next, for each year, you look at what you actually used of the annual allowance. Everything you did not use goes into the pot for carry-forward allowance. The carry-forward allowance is therefore effectively the sum total of the unused annual allowances for a maximum of the last ten years. If you have not used a pension for the last ten years, you have a large carry-forward allowance. If you have accrued funds through a supplementary pension (second pillar), you deduct this using Factor A.

‍

A simple example:

Suppose your annual allowance was €2,000 each year for the past 3 years, but you did not make any contributions. Then your carry-forward allowance is now €6,000 (3 × €2,000). If you only used a portion in some years, you only count the unused portion.

‍

Fiscal maximum: 

When calculating carry-forward allowance, you must take into account a fiscal maximum per year (see next section). Furthermore, the oldest annual allowance lapses each year as soon as it is more than ten years old – so it is use it or lose it after that period.

‍

Are there tools to calculate carry-forward allowance?

Yes, there are. Calculating annual allowance and carry-forward allowance can be complex, especially if you have to include Factor A and incomes over multiple years. You can use the following tools for this.

‍

Annuity Premium Tool from the Tax Authority (Belastingdienst):

The Tax Authority has created an annuity tool to calculate the carry-forward allowance. You can find it here belastingdienst.nl.

Use mijnpensioenoverzicht.nl to see where you have accrued a pension.

‍

Fiscal rules and maximums for carry-forward allowance

The Tax Authority applies strict rules for the amounts you may contribute with tax advantage. We have listed the most important fiscal rules and maximums (current up to and including 2025).

‍

Annual allowance percentage:

Since 1 January 2023, the accrual percentage for annual allowance has been increased to 30% of your premium basis. Previously, this was 13.3%.

‍

Carry-forward allowance:

You can still utilise unused annual allowance up to 10 years back. In practical terms, this means that in 2025 you can catch up on the annual allowance from 2015 onwards.

‍

Maximum carry-forward period and age:

You are also allowed to utilise this carry-forward allowance for longer as you get older. Since 2023, it has been permitted to contribute annuity premiums within your annual and carry-forward allowance up to 5 years after reaching the AOW age. Previously, that limit was strictly at the AOW age itself. The new rule allows people who have just retired to still utilise their remaining fiscal allowance for extra contributions for a few years.

‍

Maximum amounts (annual):

The law sets an annual maximum for deductible contributions, both for the current annual allowance and for the carry-forward allowance. These maximums are indexed annually and follow from the formula and legal limits. For 2025, the maximum annual allowance is €35,798 and the maximum carry-forward allowance is €42,108.

‍

How do you utilise the carry-forward allowance in practice?

Utilising the carry-forward allowance is done by making extra contributions to an annuity product, followed by claiming the tax deduction. Broadly, this is how it works:

‍

First, calculate your annual allowance and carry-forward allowance.

Use the data on your income and pension accrual from previous years for this. The Tax Authority offers an online calculation tool that you can use to calculate the maximum amount you are allowed to contribute with deduction. This gives you insight into your current annual allowance (of the current year) and the potential carry-forward allowance (unused allowance from previous years).

‍

‍Open or use an annuity product.

If you do not have one yet, you can open an annuity account (pension investing). If you already have such an account, you can make additional contributions to it. Choose a product that suits your situation.

‍

Contribute an amount within your allowance.

Transfer the amount you want to contribute to the annuity account before 31 December of the relevant year. To receive a deduction in 2025, the contribution must have been made in 2025, for example. You can choose whether you only contribute your annual allowance for this year, or also (a part of) your carry-forward allowance from previous years. You do not necessarily have to contribute the maximum; less is also permitted.

‍

Declare the contribution in your tax return.

When you complete your income tax return for the year of contribution, you state the paid annuity amount as a deductible item “expenditure for annuity”. This reduces your taxable income. The immediate effect is usually a tax refund or less tax payable for that year. The maximum deductible amount is automatically limited to your annual allowance + carry-forward allowance; the Tax Authority will not allow anything above that as a deduction.

‍

Receive tax advantage.

Due to this deduction, you receive a portion of your contribution back from the tax authorities. How much you receive back depends on your income tax rate. For example, if you earn enough for the highest rate (49.5%), every €1000 contribution yields you approximately €495 back via tax.

In lower brackets, the advantage is slightly lower but still substantial. You often receive the refund in the spring after your return, or you can benefit monthly earlier via a preliminary refund.

‍

Examples of when you use it

Carry-forward allowance is particularly useful for people whose pension accrual is not uniform or automatic. Some common situations:

‍

Self-employed without a pension scheme:

Self-employed persons (ZZP'ers) and other entrepreneurs without an employer-provided pension often have a significant pension shortfall, because they accrue little or nothing in the second pillar. They can use their annual allowance each year, and if they miss a year (for example, due to investments in the business or a disappointing year), a carry-forward allowance is built up. In a good year, they can then make up for lost time and contribute several years of missed contributions at once. This offers entrepreneurs the opportunity to top up their pension pot with a tax advantage, despite irregular incomes.

‍

People with fluctuating incomes or career break(s):

Among employees, it can also happen that they have a pension shortfall, for example after a period of reduced work, a sabbatical, or redundancy. Suppose someone works abroad for a few years without a pension scheme, or temporarily reduces work (unpaid leave, caring for children, etc.). Little pension is accrued during those years, so an annual allowance arises which may not be immediately utilised.

Later, when the income is stable again, this person can use the carry-forward allowance to make extra contributions. Someone with fluctuating incomes, for example years with high bonuses alternated with years without, can also choose to make extra contributions in the good years.

‍

Started pension accrual later:

Someone who only realises at a later age that his/her pension accrual is insufficient can still make accelerated contributions thanks to the carry-forward allowance. Suppose a person in their fifties has not used any or little annual allowance for years (for example, because they did not know about it or because paying off the mortgage took priority). Now that the pension age is approaching, they want to accrue extra pension.

Thanks to the carry-forward allowance, they can use the unused allowance from the past ten years. This can amount to tens of thousands of euros.