Contributions paid into retirement savings plans

Regulation usually defines a (minimum) contribution rate for mandatory and auto-enrolment plans. The responsibility to pay the contributions may fall on the employees (e.g. in Chile), on the employers (e.g. in Australia, Korea, Norway, the Slovak Republic) or on both (e.g. in Estonia, Iceland, Switzerland). This obligation may only apply to certain employees or under certain conditions (e.g. earning threshold in Australia, planned to be removed from 1 July 2022). Contributions may be topped by state matching contributions (e.g. New Zealand, Turkey) or subsidies (e.g. Mexico).

Mandatory contribution rates vary across countries. Iceland sets the highest mandatory contribution rate at 15.5% of salary, split between employers (11.5%) and employees (4%). Mandatory contribution rates also represented over 10% of the salary in Colombia, Denmark (defined in collective agreements), and Israel. By contrast, Norway has the lowest mandatory contribution rate (2% paid by the employer). Employers and employees can however agree on whether employees have to contribute on top of employer contributions. These mandatory contribution rates sometimes vary by income (e.g. ITP1 and SAF-LO plans in Sweden) or by sector in which employees work (e.g. public or private in Mexico).

Some countries have been flexible regarding mandatory contribution rates in response to COVID-19, allowing temporary reductions, postponements or suspensions of mandatory contributions to retirement savings plans. In Finland, employer contributions were lowered by 2.6 percentage points from 1 May 2020 and until the end of 2020. Employers and self-employed in Finland could also agree with their pension provider to postpone the payment of pension contributions into earnings-related pension plans by three months. In Colombia, mandatory contributions to the personal pension system were reduced from 16% to 3% for April and May 2020, but missing contributions are due within 36 months from 1 June 2021. Estonia suspended employer contributions of 4% of salary to the second pension pillar between 1 July 2020 and 31 August 2021. Members were also given the possibility to stop their own contributions between 1 December 2020 and 31 August 2021.

On top of the minimum mandatory contributions, individuals or their employers may have the option of making additional voluntary contributions. In New Zealand, the minimum contribution rate for KiwiSaver plans for employees is 3%. Members can however select a higher personal contribution rate of 4%, 6%, 8% or 10% of salary. In Poland, the minimum contribution rate for employee capital plans (PPK) is 2% for employees and 1.5% for employers. Employers and employees have the option of making additional contributions of up to 2.5% (for employers) and 2% (for employees). In Australia, employees have no obligation to contribute to a plan but can make voluntary contributions on top of their employer’s contributions.

In voluntary plans, there may be no required nor minimum amount of contributions expected at the national level. Personal plans may however include a ceiling to benefit from tax advantages. Occupational plans may define specific contribution rates for employees and employers in the plan rules. The contribution rates may vary according to the funding of the plan in the case of defined benefit (DB) plans.

The average effective annual contributions per member (relative to average annual wages) vary a lot across countries. The largest amount of contributions per member in 2020 were paid in Australia, Canada and Switzerland (over 12% of the average wage per member), given the relatively high coverage rate in these countries, high contribution rates, and programmes to support the wages of people during the pandemic. Additional voluntary contributions from employees into superannuation schemes may also account for the high rate in Australia, above the mandatory 9.5% contribution rate. Contributions per member (relative to the average wage) are lower in other countries, and sometimes lower than the minimum mandatory contribution rates such as in Chile and Mexico, which may be due to some people not making contributions in a plan (even if they have one).

Average effective annual contributions may be expressed per account instead of member, as the exact number of members holding one (or several) pension plans is sometimes unknown. This is the case for instance in France where individuals can have an occupational (e.g. PER Collectif) and a personal plan (e.g. PER Individuel).

The population holding a pension plan may not be representative of the population on which the average annual wages were calculated and used for the assessment of the average effective annual contributions per member (or account).

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