Difference between AOW and private pension insurance

The AOW voluntary insurance fundamentally differs from private pension insurances. AOW is state pension with lifelong, index-linked benefits and no means-testing, whereas private products such as annuities involve capital accumulation with investment risk and possible inheritance buildup. AOW premium is income-dependent and tax-deductible, private premiums often are too but subject to annual room limit (Income Tax Act 2001, art. 11.1). AOW supplements basic pension up to 100%, private focuses on supplementary pension. Taxation: AOW is fully taxable in box 1, private payouts partly. For self-employed without employee pension, AOW is crucial; private offers flexibility but no guarantee. Comparison: AOW costs €1,800/year for €1,200 payout, private can yield higher returns in good markets. Risk: AOW is risk-free, private market-dependent. Choose AOW for AOW gap, private for extra buildup. Combine for optimal pension. Consult Tax Authorities for annual room and SVB for AOW check. Wage Tax Act regulates coordination. (197 words)