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MIND THE GAP: The Effectiveness of Incentives to Boost Retirement Saving in Europe


  • Börsch-Supan, Axel

    () (Sonderforschungsbereich 504)


Pension reforms all across Europe have a common theme: to reduce the generosity of the pay-as-you-go public pension pillar threatened by population aging, and to build up new pillars by private saving through occupational and individual pension plans. The extent of such retirement saving varies a great deal across Europe. This variation reflects, among other factors, the differences in public pension sys-tems, taxation and capital market regulations. The first part of this paper looks at this variation in an attempt to learn about the effectiveness of the various incentives to boost retirement saving. While we find a strong correlation between the generosity of pay-as-you-go pensions and retirement saving, there is no straight correlation between the volume of retirement saving and the extent to which it is tax-favored. The second part of the paper uses the recent reforms in Germany as “experiments” that may shed light on which incentives might work and which might fail. We describe the introduction of the tax-favored “Riester pension plans” in 2001 and the 2004 tax reform, which changes the tax treat-ment of retirement savings in Germany from a conventional to a deferred taxation scheme. In spite of a deep subsidy and a generous tax treatment, “Riester pensions” have not found much attraction, while the originally heavily tax-favored whole life insurance is still wide spread. We conclude that boosting retirement saving requires more than simply tax relief.

Suggested Citation

  • Börsch-Supan, Axel, 2004. "MIND THE GAP: The Effectiveness of Incentives to Boost Retirement Saving in Europe," Sonderforschungsbereich 504 Publications 07-27, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  • Handle: RePEc:xrs:sfbmaa:07-27 Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.

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    References listed on IDEAS

    1. Axel Börsch-Supan & Alexander Ludwig & Joachim Winter, 2006. "Ageing, Pension Reform and Capital Flows: A Multi-Country Simulation Model," Economica, London School of Economics and Political Science, vol. 73(292), pages 625-658, November.
    2. Borsch-Supan, Axel & Reil-Held, Anette & Rodepeter, Ralf & Schnabel, Reinhold & Winter, Joachim, 2001. "The German Savings Puzzle," Research in Economics, Elsevier, vol. 55(1), pages 15-38, March.
    3. Pablo Antolín & Alain de Serres & Christine de la Maisonneuve, 2004. "Long-Term Budgetary Implications of Tax-Favoured Retirement Plans," OECD Economics Department Working Papers 393, OECD Publishing.
    4. A Börsch-Supan & A Brugiavini, 2001. "Savings: the policy debate in Europe," Oxford Review of Economic Policy, Oxford University Press, vol. 17(1), pages 116-143, Spring.
    5. Börsch-Supan, Axel & Reil-Held, Anette & Schnabel, Reinhold, 1998. "Pension Provision in Germany," Sonderforschungsbereich 504 Publications 98-07, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
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    Cited by:

    1. Axel Börsch-Supan & Anette Reil-Held & Daniel Schunk, 2007. "The savings behaviour of German households: First Experiences with state promoted private pensions," MEA discussion paper series 07136, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    2. Callan, Tim & Keane, Claire & Walsh, John R., 2009. "Pension Policy: New Evidence on Key Issues," Research Series, Economic and Social Research Institute (ESRI), number RS14.
    3. Pahnke, Luise & Honekamp, Ivonne, 2010. "Different Effects of Financial Literacy and Financial Education in Germany," MPRA Paper 22900, University Library of Munich, Germany.
    4. Beatrice Scheubel & Daniel Schunk & Joachim Winter, 2009. "Don't Raise the Retirement Age! An Experiment on Opposition to Pension Reforms and East-West Differences in Germany," CESifo Working Paper Series 2752, CESifo Group Munich.
    5. Casper Ewisk, 2005. "Reform of Occupational Pensions in the Netherlands," De Economist, Springer, vol. 153(3), pages 331-347, September.

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