IDEAS home Printed from https://ideas.repec.org/a/bde/journl/y2022i02daan10.html
   My bibliography  Save this article

The effect of workplace pension schemes on households' private savings

Author

Listed:
  • Marina Gómez-García
  • Ernesto Villanueva

Abstract

The tax incentive enjoyed by workplace pension schemes could encourage participants to increase their total savings or, alternatively, crowd out savings that would have materialised in other financial vehicles in the absence of this incentive. This article uses data from the Spanish Survey of Household Finances to estimate the additional savings generated by this type of scheme. To this end, the financial position of workplace pension scheme participants is compared to that of a group of workers of similar ages, with similar educational attainment levels and occupations, but who do not participate in such schemes. Once the comparable group is constructed, it can be seen that, on average, each euro saved in workplace pension schemes increases private savings by around 66 cents. This is the ratio of the difference in average net wealth between participants and their comparable group (€13,600) to the average amount accumulated in pension schemes (€20,600). Once adjusted for the fact that contributions are taxexempt, the additional savings generated amount to around 31 cents for every euro contributed, calculated as the ratio of the €6,500 difference in tax-relief-adjusted wealth between the two groups to the average amount accumulated in workplace pension schemes.

Suggested Citation

  • Marina Gómez-García & Ernesto Villanueva, 2022. "The effect of workplace pension schemes on households' private savings," Economic Bulletin, Banco de España, issue 2/2022.
    • Handle: RePEc:bde:journl:y:2022:i:02:d:aa:n:10
    Note: Analytical Articles
    as

    Download full text from publisher

    File URL: https://www.bde.es/f/webbde/SES/Secciones/Publicaciones/InformesBoletinesRevistas/ArticulosAnaliticos/22/T2/Files/be2202-art10e.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Guido W. Imbens, 2015. "Matching Methods in Practice: Three Examples," Journal of Human Resources, University of Wisconsin Press, vol. 50(2), pages 373-419.
    2. Alexander M. Gelber, 2011. "How Do 401(k)s Affect Saving? Evidence from Changes in 401(k) Eligibility," American Economic Journal: Economic Policy, American Economic Association, vol. 3(4), pages 103-122, November.
    3. Amromin, Gene & Huang, Jennifer & Sialm, Clemens, 2007. "The tradeoff between mortgage prepayments and tax-deferred retirement savings," Journal of Public Economics, Elsevier, vol. 91(10), pages 2014-2040, November.
    4. Raj Chetty & John N. Friedman & Søren Leth-Petersen & Torben Heien Nielsen & Tore Olsen, 2014. "Active vs. Passive Decisions and Crowd-Out in Retirement Savings Accounts: Evidence from Denmark," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(3), pages 1141-1219.
    5. Benjamin, Daniel J., 2003. "Does 401(k) eligibility increase saving?: Evidence from propensity score subclassification," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1259-1290, May.
    6. Jonathan Cribb & Carl Emmerson, 2020. "What happens to workplace pension saving when employers are obliged to enrol employees automatically?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(3), pages 664-693, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nikolov, Plamen & Adelman, Alan, 2019. "Do private household transfers to the elderly respond to public pension benefits? Evidence from rural China," The Journal of the Economics of Ageing, Elsevier, vol. 14(C).
    2. Andersen, Henrik Yde, 2021. "Pension taxation, household debt and the real economy," Nationaløkonomisk tidsskrift, Nationaløkonomisk Forening, vol. 2021(1), pages 1-14.
    3. John Beshears & James J. Choi & David Laibson & Brigitte C. Madrian & William L. Skimmyhorn, 2022. "Borrowing to Save? The Impact of Automatic Enrollment on Debt," Journal of Finance, American Finance Association, vol. 77(1), pages 403-447, February.
    4. Arun Advani & Hannah Tarrant, 2021. "Behavioural responses to a wealth tax," Fiscal Studies, John Wiley & Sons, vol. 42(3-4), pages 509-537, September.
    5. Derek Messacar, 2018. "The Effects of Vesting and Locking in Pension Assets on Participation in Employer-Sponsored Pension Plans," Journal of Labor Research, Springer, vol. 39(2), pages 178-200, June.
    6. Chan, Marc K. & Polidano, Cain & Vu, Ha & Wilkins, Roger & Carter, Andrew & To, Hang, 2020. "How Effective are Matching Schemes in Enticing Low-income Earners to Save More for Retirement? Evidence from a National Scheme," IZA Discussion Papers 13939, Institute of Labor Economics (IZA).
    7. Ihle, Dorothee, 2017. "Quantile treatment effects of Riester participation on wealth," CAWM Discussion Papers 96, University of Münster, Münster Center for Economic Policy (MEP).
    8. William G. Gale & Samuel Brown, 2013. "Tax Reform for Growth, Equity, and Revenue," Public Finance Review, , vol. 41(6), pages 721-754, November.
    9. Youssef Benzarti & Jarkko Harju & Tuomas Matikka, 2020. "Does Mandating Social Insurance Affect Entrepreneurial Activity?," American Economic Review: Insights, American Economic Association, vol. 2(2), pages 255-268, June.
    10. Andersen, Henrik Yde, 2018. "Do tax incentives for saving in pension accounts cause debt accumulation? Evidence from Danish register data," European Economic Review, Elsevier, vol. 106(C), pages 35-53.
    11. Adam M. Lavecchia, 2018. "Do "Catch-Up Limits" Raise Retirement Saving? Evidence from a Regression Discontinuity Design," National Tax Journal, National Tax Association;National Tax Journal, vol. 71(1), pages 121-154, March.
    12. Juan Ayuso & Juan F. Jimeno & Ernesto Villanueva, 2019. "The effects of the introduction of tax incentives on retirement saving," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 10(3), pages 211-249, November.
    13. Goodman, Lucas, 2020. "Catching up or crowding out? The crowd-out effects of catch-up retirement contributions on non-retirement saving," Journal of Public Economics, Elsevier, vol. 188(C).
    14. Anne-Marie Brook, 2014. "Options to Narrow New Zealand’s Saving – Investment Imbalance," Treasury Working Paper Series 14/17, New Zealand Treasury.
    15. Laurence O'Brien, 2023. "The effect of tax incentives on private pension saving," IFS Working Papers W23/10, Institute for Fiscal Studies.
    16. Laurence O'Brien, 2024. "The effect of tax incentives on retirement saving," IFS Working Papers W24/45, Institute for Fiscal Studies.
    17. Dorothee Ihle, 2017. "Quantile Treatment Effects of Riester Participation on Wealth," SOEPpapers on Multidisciplinary Panel Data Research 954, DIW Berlin, The German Socio-Economic Panel (SOEP).
    18. Justin Falk & Nadia Karamcheva, 2019. "The Effect of the Employer Match and Defaults on Federal Workers’ Savings Behavior in the Thrift Savings Plan: Working Paper 2019-06," Working Papers 55447, Congressional Budget Office.
    19. Raj Chetty & John N. Friedman & Søren Leth-Petersen & Torben Heien Nielsen & Tore Olsen, 2014. "Active vs. Passive Decisions and Crowd-Out in Retirement Savings Accounts: Evidence from Denmark," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(3), pages 1141-1219.
    20. Joshua Blumenstock & Michael Callen & Tarek Ghani, 2018. "Why Do Defaults Affect Behavior? Experimental Evidence from Afghanistan," American Economic Review, American Economic Association, vol. 108(10), pages 2868-2901, October.

    More about this item

    Keywords

    workplace pension scheme; participants; net wealth; saving; financial asset wealth.;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bde:journl:y:2022:i:02:d:aa:n:10. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ángel Rodríguez. Electronic Dissemination of Information Unit. Research Department. Banco de España (email available below). General contact details of provider: https://edirc.repec.org/data/bdegves.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.