OECD/EU PROJECT ON TAXATION,

FINANCIAL INCENTIVES AND

RETIREMENT SAVINGS

Pablo AntolinOECD DAF/FIN Pension Unit

Objective 2. Developing complementary private/funded retirement savings

Goals: (1) better opportunities for complementary savings; (2) enhance safety and performance of funded schemes

The OECD has several projects that we believe could be helpful contribution to the EC work

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EC White Paper

OECD Roadmap on Retirement Saving Schemes: improve the design of these schemes with the goal of strengthening retirement income from this schemes.

Assess how much people have and may have to finance retirement, examining the role of private provision in retirement adequacy - RSA

Assessment of financial and tax incentives promoting retirement savings

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EC White Paper

FINANCIAL AND TAX INCENTIVES

THE COST EFFECTIVENESS OF

PUBLIC SUPPORT FOR PRIVATE PENSION

PROVISION

Assess the role of the tax system and other financial incentives in supporting retirement income security

Determine the total budgetary cost of financial and tax incentives, per unit of contribution and as a share of GDP

Assess whether those incentives are the more efficient way to provide for retirement (cost effectiveness – policies)

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Purpose of the Project

Stocktaking of the tax and fiscal incentives to save for retirement in each country

Assessment of those incentivesImpact on retirement savingsAssessment of the fiscal costEmpirical evidenceAlternative incentivesPolicy recommendations

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Outline of the project

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• Tax rules for contributions, returns on investment and pension benefits of different types of pension arrangements in each country.

• Differentiating by PAYG pensions and funded pensions, and within the later btw occupational and personal arrangements as well as DB and DC

• Tax rules on programmed withdrawals, annuity products

Stocktaking

• It will be done by different income levels• Impact of tax and fiscal incentives of

– Contributions– Returns on investment– Pension benefits

• Indicators: (1) Average net tax incentive per unit of pre-tax contributions

• (2) Tax expenditures: total budgetary expenditure of tax incentive through the life cycle

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Assessment tax and fiscal incentives

• This section incorporates the potential effect of public retirement provision (e.g. interaction btw means tested public benefits and minimum pensions)

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Impact on retirement savings

• Empirical evidence on the impact of tax and financial incentive on the amount of retirement saving

• New savings versus reallocation• Need for longitudinal studies• Literature review

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Empirical evidence

• Tax and fiscal incentives that are inversely related to income

• Tax and fiscal incentives income neutral

• Matching contributions• Either by the government or

employers• Subsidies for low income individuals

Alternative incentives

• Cost effectiveness of tax and financial incentives to promote private pension savings

• Current arrangements and alternative arrangements

• Would it be better to use the tax expenditure of those incentives to have more resources in the PAYG public pension system: Depends on the sources of the financial unsustainability of the public provision.

Policy discussion

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THANK YOU VERY MUCH

www.oecd.org/insurance/private-pensions