When you are looking to invest money with a good interest for your retirement and get a huge tax break from the government on top of that, the level 3 flexible pension plan might be very interesting for you.
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How the level 3 Pension works
The level 3 Pension works as follows: You pay a monthly contribution towards the pension plan and the money is compounding in funds until you retire. In your retirement you have the option to take all the money at once or get a lifelong monthly pension from the insurance or do a mix of both.
Level 3 Pension vs. broker account
So far so good, but what makes the level 3 pension plan different from a broker account where you can also invest in funds? It is the long term retirement aspect. Of course fund investing should always be long term, but when you invest with a broker, that means with a bank, you pay massive amounts of taxes long term because you are subject to full capital gains taxation.
And don’t get me wrong, we are offering broker accounts ourselves and when you want to invest for your retirement with a broker account, this is absolutely fine, you can do so with us, but when we look at how the government has set tax incentives, a broker account is for short to midterm investing and a pension plan is better for long term investment.
Long-term tax benefits
Because when you do the same investment in a pension plan, while you are contributing you pay 0 capital gains tax, which of course helps the money compound way quicker. Also, when you pay out the money after the age of 62 you get a massive tax break when accessing the money, because normally you have to pay capital gains tax on all the profits, in the pension plan, you get 50% of the profits tax-free in your pocket and only need to tax the other half. The tax break is even bigger, when you take the monthly pension, then you pay almost no tax on that.
Further advantages
In addition, the insurance has some services that make your life a lot easier. You can read more about the additional services in a pension plan here: Additional Services in a Perfect Pension Plan.
And of course a pension plan has costs for the services, a good pension plan has costs of around 1% of your capital annually. Which in my opinion is very fair considering all the tax advantages and extra services you have.
Summary: The level 3 flexible pension plan is interesting for you, when you want to invest long term for your retirement and want to have close to 0 work with it. If you want to see how the numbers for the level 3 pension plan are for your individual situation, feel free to book yourself a free initial meeting with us.
Summary
Advantages:
✅ free fund selection without capital-gains-taxes
✅ tax advantages on payout
✅ lump-sum payout or livelong monthly pension choosable
Disadvantages:
❌ no immediate tax advantages
❌ higher cost than a broker account
❌ only profitable long-term
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