Lump Sum from Pension
For residents of Leiden, the lump sum scheme allows you to withdraw a portion of your accrued pension in a single payment. This provides greater flexibility at retirement, for example, for local expenses such as renovating a home in the historic city center or paying off debts. The scheme supports a more modern pension system and falls under the Future Pensions Act, with tailored advice available through the Leiden Legal Aid Office.
What does a lump sum mean for Leiden residents?
With a lump sum, you do not receive everything as a monthly pension, but you can withdraw a one-time amount from your pension pot, up to 10% of the total value. This is intended for participants in employer pensions or self-employed individuals with an annuity policy in the Leiden region. It gives you more control over your finances at retirement. For a pension of €200,000, for example, you could withdraw up to €20,000 at once, which can be useful for local investments such as making your Leiden home more sustainable.
This option fits into the reforms of the Dutch pension system. Your pension fund or insurer calculates the amount based on its actuarial value. After withdrawal, your monthly pension decreases, as that portion no longer generates returns. Leiden residents can inquire with the Municipality of Leiden about possible subsidies related to such expenditures.
Legal basis of the scheme
The lump sum scheme is regulated in the Lump Sum, Early Retirement and Pension Increase Act, effective from 1 January 2023. This act amends the Pension Funds Act (PFA) and the Mandatory Participation in an Occupational Pension Scheme Act (MPOPSA), particularly Article 1, first paragraph, part b, of the PFA for one-time payments.
The act also complies with the European Directive (EU) 2019/1158 on access to occupational pensions. For the linked Early Retirement Scheme (RVU), there is a relaxation in the Act on Excessive Remuneration at Financial Undertakings. Tax-wise, it is handled by the Tax Authorities under the Income Tax Act 2001 (Article 11, paragraph 1, part d). The scheme applies to pensions from 1 January 2023, with transitional provisions for older accruals. Pension funds must offer this option to retiring Leiden residents.
Practical examples for Leiden
Suppose you are 67 and retiring in Leiden with an accrued capital of €300,000. You withdraw a €30,000 lump sum to reduce the mortgage on a national monument. Your monthly pension decreases by about €100, but you save on interest and have immediate funds for local improvements.
Or as a self-employed person in Leiden's city center with a €100,000 annuity: withdraw €10,000 for an electric bike, aligning with the city's sustainable mobility initiatives. Tax-wise, it falls into Box 1 with a tax credit, often more advantageous than periodic payments alone.
Rights and obligations as a Leiden resident
You have the right to request a lump sum from your administrator, in writing via a form. This can be done on your pension date or later upon review (up to five years afterward), with no minimum but a 10% maximum. Inform your partner about the partner's pension.
Your obligations include notifying your partner and accounting for Box 1 tax, with a tax credit up to €3,359 (2023). Be mindful of impacts on benefits such as rent allowance in Leiden or healthcare allowance, and AOW if you are not yet eligible. The District Court of Leiden may be involved in disputes over pension rights. The administrator must inform you of the consequences, including calculations; you can seek advice from the Leiden Legal Aid Office.
Comparison of pension options
| Option | Benefits | Drawbacks | Application in Leiden |
|---|---|---|---|
| Lump sum | Immediate capital; tax benefits for local expenses | Lower pension; tax | For home improvements or debts in the city |
| Periodic pension | Stable income; inflation protection | Limited flexibility; no lump sum | For daily life in Leiden |
| Pension review | Change afterward; up to 10% conversion | Limited to five years | For changing circumstances in the region |
Frequently asked questions for Leiden residents
Can I withdraw a lump sum if I am already retired?
Yes, within five years of your pension start, you can review and withdraw for pensions after 1 July 2023. Contact the Leiden Legal Aid Office for guidance.
What are the tax implications?
It falls into Box 1 at your rate, with a tax credit up to €3,359 (2023), often more favorable. The Tax Authorities in the Leiden region can explain specific cases.
Impact on AOW or benefits?
It counts as income for benefits in the withdrawal year, possibly reducing entitlement. No asset impact for AOW; check with the Social Insurance Bank or Municipality of Leiden for your situation.