Third Pillar Calculator

How does this work?

This calculator will simulate a contribution into a third pillar and compare it with an investment into free assets (outside retirement benefits). This contribution will stay in the third pillar for multiple years. But this calculator only simulates a single yearly contribution, not one every year.

In the first year, the third pillar contribution gives us a tax rebate. This rebate is invested just like free assets.

Each year, the third pillar assets will grow according to the average third pillar returns. The free assets grow each year according to the investment returns. Additionally, wealth tax must be paid on the free assets but not on the pension assets.

There are a few limitations to this simulation you should be aware of:

• In this model, the income marginal tax rates are fixed. But in practice, if you do a considerable buyback, this will also lower your marginal tax rate.
• In this model, the wealth marginal tax rate is also fixed. But again, in practice, the wealth tax will grow as your net worth grows.
• In practice, returns will vary from year to year. Since we do not know the future, our model only uses average returns.

If you want more details on this question, read my article on whether you should contribute to your third pillar.

And if I have convinced you to contribute to the third pillar, you can check out my review of Finpension 3a, the third pillar I am currently using.