Pension or Lump Sum Calculator

How does this work?

This calculator will simulate taking out your second pillar assets as a lump sum or as a pension and compare the two options together.

When you take your second pillar as a lump sum, you pay a withdrawal tax on the total amount. You can then invest it to generate returns. If you take a pension, you will pay income tax on the amount.

There are two ways of comparing the two options:

1. You can compute an annuity based on the capital and returns and withdraw that every year to exhaust the entire capital.
2. You can accumulate capital with both options. The capital will start high, but the pension will accumulate steadily over time.

Of course, this is only a simulation, so it will have some limitations, for instance:

• Marginal tax rates are fixed. In practice, adding a significant capital will increase your marginal wealth tax rate, and adding a significant pension will increase your marginal income tax rate.
• This does not take any potential inflation adjustments into account for the pension.
• This simulation only uses average returns, which are not precise for the short term.
• This simulation only considers a single withdrawal per year, while it would be more efficient to withdraw on a monthly basis.

If you want more details on this question, you can read my article on whether you should withdraw your second pillar as a pension or a lump sum.