Financial Incentives and Retirement Savings

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Are tax incentives the best way to encourage people to save for retirement? This publication assesses whether countries can improve the design of financial incentives to promote savings for retirement. After describing how different countries design financial incentives to promote savings for retirement in funded pensions, the study calculates the overall tax advantage that individuals may benefit from as a result of those incentives when saving for retirement. It then examines the fiscal cost of those incentives and their effectiveness in increasing retirement savings, and looks into alternative approaches to designing financial incentives. The study ends with policy guidelines on how to improve the design of financial incentives to promote savings for retirement, highlighting that depending on the policy objective certain designs of tax incentives or non-tax incentives may be more appropriate.



Are financial incentives effective tools to increase participation in and contributions to retirement savings plans?

This chapter examines whether financial incentives are effective tools to promote retirement savings. It reviews the empirical and non-empirical literature analysing the impact of tax and non-tax financial incentives on the way individuals save for retirement. In particular, it assesses whether individuals increase their participation in, and contributions to, retirement savings plans as a response to financial incentives, and whether this is achieved through an increase in savings or a reallocation of savings.


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