We model a three-pillar pension system and analyse the impact of exogenous shocks on an open economy, using an overlapping generation model where individuals live for two periods. The three-pillar pension system consists of (1) a PAYG pension system, (2) a defined benefits pension fund, and (3) private savings. The economy is exposed to an ageing trend, inflation and a stock market crash. We show that in the three-pillar pension system the impact of these shocks on the economy is mitigated when compared to a twopillar system, since each shock has a different impact on the three pillars. In order to illustrate the working of the model with respect to the impact of shocks, both in m a g n i t u d e a n d t h e d e v e l o p m e n t o v e r t i m e , w e p r o v i d e s i m u l a t i o n r e s u l t s f o r t h e Netherlands.