Individual Pension Insurance and Long-term Savings Accounts Taxed as Capital Income

As of the beginning of 2005, after a brief transition period, voluntary individual pension has been taxed as capital rather than earned income.

Contributions to long-term savings accounts are deductible in the capital income taxation in the same way as are the contributions to voluntary pension insurance policies. The return for invested assets is not taxed during the savings period.

Payments paid by the service provider to the saver or other person entitled to the assets according to the savings contract when the person in question has reached the retirement age are considered capital income for the recipient. Taxable capital income is subject to a capital income tax of 30 per cent.

Contributions to a voluntary pension insurance or a long-term savings account can be deducted from the capital income to an annual amount of EUR 5,000. If the employer has taken out such insurance for the taxpayer, the contributions for an insurance or long-term savings account taken out privately can be deducted to a maximum annual amount of EUR 2,500.

In general, long-term savings can be drawn at the earliest at the actual retirement age of 63.

However, the lower retirement age entitling to tax deductions in individual pension insurance has been raised on several occasions. For new insurances, the lowest retirement age is the same as in long-terms savings contracts, i.e., 63 years.

The lowest retirement age at the time of taking out the insurance

 Insurance taken out  Age at which pension starts
 – 30 Sept. 1992  55 yrs
 1 Oct. 1992 – 23 June 1999  58 yrs
 24 June 1999 – 5 May 2004  60 yrs
 6 May 2004 – 17 Sept. 2009  62 yrs
 18 Sept. 2009 –

 the retirement age under the Employees Pensions Act,

currently 63 yrs in most cases

Further information