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Financial Incentives and Retirement Savings

image of Financial Incentives and Retirement Savings

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.

English

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Foreword

Financial Incentives and Retirement Savings reviews how countries design financial incentives to promote savings for retirement and examines whether there is room for improvement. Given the cost financial incentives represent for governments, it is important to verify whether they are still effective tools for encouraging citizens to save for retirement. The publication first describes how countries currently design financial incentives. It then assesses the overall tax advantages that these incentives provide to individuals, how these incentives affect the way individuals save for retirement and the fiscal cost these incentives represent to governments. The publication also compares different approaches to designing financial incentives based on their inherent characteristics and within a common framework to assess the different implications for individuals and governments. Finally, it provides policy guidelines to help countries improve the design of their financial incentives with a view to promoting savings for retirement.

English

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