AOW Deferral: Legal Restrictions
AOW deferral means that you claim your AOW later than the statutory age (67 years in 2024). Although this may seem financially attractive, there are important legal restrictions that you need to know. These restrictions are laid down in the General Old Age Pensions Act (Article 10 paragraphs 1 and 2 AOW Act) and the Income Tax Act 2001. In this article, we explain what you may and may not do, with practical examples and tax consequences.
What is AOW Deferral?
AOW deferral means that you consciously choose to claim your General Old Age Pensions Act (AOW) later than the statutory age. The AOW age gradually increases to 67 years (in 2024). For example, if you claim your AOW in 2025, while your statutory age is 67 years, you can defer it. This is possible, but not without risks and restrictions.
The main reasons to defer AOW are:
- Financial advantage: You receive a higher AOW benefit (0.53% more per month per year of deferral).
- Flexibility: You can continue working longer or let your assets grow.
- Health insurance: For 65-year-olds, health insurance is mandatory, but after 67 years, the AOW scheme applies. Deferral can prompt thinking about this.
But beware: the law imposes strict conditions on deferral. These are intended to prevent abuse and ensure the sustainability of the system.
Legal Basis: What Does the Law Say?
The option to defer AOW is laid down in:
- Article 10 paragraphs 1 and 2 AOW Act: This states that you may defer your AOW, but there is a maximum deferral period.
- Article 10a AOW Act: Restrictions on repayment if, for example, you pass away before receiving the deferred amount.
- Income Tax Act 2001 (Article 3.109): Tax consequences of deferral, such as tax on the higher AOW amount.
Maximum Deferral Period
You may defer your AOW for a maximum of 5 years. This means that if your statutory AOW age is 67 years, you may claim your AOW at the latest on your 72nd birthday. After this age, your AOW is automatically granted, even if you do not apply for it yourself.
Example:
| Statutory AOW Age | Latest Possible Claim Date |
|---|---|
| 67 years (2024) | 72 years |
| 68 years (2029) | 73 years |
No Deferral Possible in Certain Situations
The law prohibits AOW deferral in the following cases:
- If you already receive another old-age pension benefit, such as a WGA benefit or an ANW benefit. You may not receive AOW alongside these benefits.
- If you have already suspended your AOW benefit earlier (for example, by stopping work before reaching the statutory age).
- If you live abroad and receive a comparable benefit there. In that case, international rules apply (EU Regulation 883/2004).
- If you receive an IB benefit (Income Provision Special Assistance), because this is intended for people with low income.
Tax Consequences of AOW Deferral
Deferring your AOW has tax consequences. The higher AOW amount you receive later is taxed as income. This can affect your tax credits and progressive tax brackets.
How Does Tax on Deferred AOW Work?
The deferred portion of your AOW is included in your annual income. This can lead to:
- Higher income tax, because your total income is higher.
- Reduced tax credits, because your income exceeds the threshold.
- No automatic deductions, such as the life course scheme or Box 3 deduction (for assets).
Example:
Suppose your normal AOW amount is €1,500 per month. If you defer it for 2 years, you will later receive €1,650 per month (0.53% extra per year). This extra amount is taxed as income, just like your other income (for example, from work or assets).
Box 1 or Box 3?
The deferred portion of your AOW falls under Box 1 (income), not under Box 3.