What is III pillar?

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The most useful way of saving for the long term

  • You may get a 20% tax rebate on your contributions.
  • You can increase and decrease the amount you pay and suspend payments for a certain period.
  • Third pillar is your personal asset and if necessary you can withdraw it before retirement.

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Majority of people expect their pension to be much higher than it will actually be. The earlier you start saving the easier your life in retirement will be.

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This a sample calculation, where the forecast return is based on the internationally used long-term historical annualized return on equity (7%); however, however this does not imply that similar returns can be achieved in the case of the III pillar. For example, the annualized return of the Swedbank pension fund V100, which invests 100% into equity, since the creation of the fund is 4,9% (30st of April 2020). Past return does not guarantee similar return in the future. The basis for the income tax refund is the income tax rate of 20%, which is valid in 2020, and the income tax refund only applies with regard to those contribution that you have made yourself, and which amount up to 15% of your gross income, but do not exceed 6,000 euros.

Why contribute to the 3rd pillar?

  1. Tax incentive

    The 3rd pillar is the only option for long-term saving that the state supports with a tax rebate. This means you may get the income tax back on contributions to the 3rd pillar. Income tax will be refunded from third pillar pension contributions that are up to 15% of your gross income but not more than 6,000 euros per calendar year. Calculate your contribution per calendar year to maximise your tax refund.

  2. You are saving for your future

    Third pillar is your personal asset and if necessary you can withdraw it before retirement. When withdrawing the assets you need to consider current tax system and that the valid rate of income tax will be deducted from the payments. Read more

    Starting from the age of 55, if you’ve been contributing to the 3rd pillar for five or more years, the income tax rate is much more favourable when you withdraw money – just 10%. The same rate applies if you’re incapacitated and unable to work. Lifelong payouts are not subject to income tax.

    Withdrawal from third pillar is considered as your yearly income and it may influence your tax-free amount. Lifelong payouts are not subject to income tax and not considered as your yearly income.

  3. Bigger pension

    On average, people in Estonia enjoy a retirement of 20 years. By saving you can influence the size of your income in the future. It’s recommended that you also put aside 10-15% of your income on a regular basis. According to various studies, the pension you receive during your retirement should be 65-70% of your existing income if you want to continue enjoying your current standard of living. It’s been estimated that the first two pillars make up around 40% of the income you’ll receive during your retirement. We recommend you to start saving as early as possible.

Choose the right 3rd pillar solution for you

Pension Insurance+

V-Funds

Income tax rebate
Partial guarantee on contributions
Possible to choose risk level
Possible to indicate beneficiary

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Choose V-fund

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To find the right 3rd pillar savings option for you, fill in this suitability questionnaire.

Useful links

Investment Helpline