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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.

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Does the design of financial incentives provide a tax advantage when people save for retirement?

This chapter assesses whether the design of financial incentives in different countries provides a tax advantage when people save for retirement. It calculates the tax advantage that individuals saving into retirement savings plans may enjoy over their lifetime. This overall tax advantage is the amount that an individual would save in taxes paid by contributing to a retirement savings plan instead of putting the same amount into an alternative benchmark savings vehicle. It includes the effect of both tax and non-tax financial incentives, and it is calculated for different types of plans across 42 OECD and selected non-OECD countries.

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