Supplementary pensions and real estate financing for self-employed individuals

Many self-employed individuals build their pension through various supplementary systems because their statutory pension is often insufficient. This is because self-employed individuals typically pay fewer social security contributions during their career. They can use their supplementary pension in different ways to finance real estate before reaching the statutory retirement age. Examples of such supplementary pensions include: POZ (Pension Agreement for Self-Employed Individuals), VAPZ (Voluntary Supplementary Pension for Self-Employed Individuals), and IPT (Individual Pension Commitment).

1. Advance on supplementary pension

Self-employed individuals can use 65-70% of their supplementary pension (VAPZ, IPT, or POZ) for real estate in the EU. They pay annual interest on the advance, depending on the interest rate in their plan. This is possible if the funds are used for the purchase, construction, improvement, repair, or renovation of real estate within the European Economic Area (EU, including Iceland, Norway, and Liechtenstein).

Note: With a unit-linked insurance product (Type 23), it is not certain that you will be able to take a portion as an advance for the loan, as this product does not guarantee a fixed return.

2. Supplementary pension as collateral

The supplementary pension can also serve as collateral for a mortgage loan. By pledging the supplementary pension, you increase the equity of the loan relative to the borrowed amount. This can result in a lower interest rate on the loan. Since this is a traditional mortgage loan, you will need to go through a notary and pay notary fees and registration duties.

3. Bullet loan with IPT

In this loan, you only pay interest during the term, with the principal repaid at the end. The IPT (Individual Pension Commitment) can serve as collateral.

You take out a loan based on the expected reserves in your pension plan at the statutory retirement age. When the bullet loan term ends and the principal is repaid, the amount borrowed from the IPT is transferred to your lending institution. These loans typically last until the statutory retirement age. The advantage is that the monthly repayments are more manageable because you only pay interest. However, the interest rate is generally slightly higher than a traditional mortgage because the principal is repaid at the end.

4. Split purchase

Through a usufruct arrangement, the company purchases the usufruct of a property, while the self-employed individual acquires the bare ownership. After the usufruct ends, the self-employed individual becomes the full owner of the property. Note: the company holds the usage rights to the property, and the property must serve the company, for example, as an income-generating property or office for the company. Only after the usufruct transfers to you as a private individual can you use the property privately.

How can self-employed individuals save for additional pensions?

Self-employed individuals can build extra pension savings through VAPZ, IPT (through their company), or POZ (for those without a company). The VAPZ offers tax benefits, while the IPT and POZ are other ways to build supplementary pensions, each with different tax rules and premium taxes.

Source: De Tijd