What is the AOW-franchise?

The AOW franchise is a fixed amount that is deducted from your gross income when calculating how much pension you are allowed to accrue. This amount is intended to take into account the AOW benefit (General Old Age Act) that you will later receive from the government. Because you are already entitled to AOW, you are not allowed to accrue extra pension on this part of your income.

In 2025, the AOW franchise is set at € 18,475. This means that when calculating your annual allowance, you first deduct this amount from your gross income, and you are only allowed to accrue tax-free pension on the remaining income.

The AOW franchise therefore ensures that you only accrue pension on the part of your income that is above the AOW level.