In short: The third pension pillar is voluntary pension saving — contributions you (or your employer) choose to pay into a voluntary pension fund, a personal pension plan or a pension insurance product.
Simply put: Nobody makes you pay into the third pillar. Many countries give tax relief on contributions, and the money is meant for the long term: early withdrawal often means tax and fees. In the EU there is also the Pan-European Personal Pension Product (PEPP), under Regulation (EU) 2019/1238; its Basic version caps costs at 1% of the accumulated capital a year.
Example: Elena pays €100 a month — €1,200 a year. If her country lets her deduct up to 10% of a €12,000 tax base and the tax rate is 10%, her tax falls by €120 a year.
Watch out: Tax relief lowers your tax; it does not guarantee a gain on the investment. Record in the contract who should inherit.
Example: Bulgaria — Personal voluntary pension contributions reduce the annual tax base by up to 10% of it (Personal Income Tax Act, Art. 19(1)). Payouts after acquiring the right to a pension are not taxed (Art. 13(1)(7)); earlier withdrawals bear a final 10% tax (Art. 38(8)(3)).
Check in your country — Ask your tax authority about the deduction limit and how payouts and early withdrawals are taxed.
Source: EIOPA — PEPP — https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp_en · Personal Income Tax Act (Bulgaria) (in Bulgarian) — https://lex.bg/laws/ldoc/2135538631