A recent study based on data from Denmark has called into question the usefulness of tax preferences to boost retirement savings in employer-provided retirement plans.
The Employee Benefit Research Institute, Washington, D.C., recaps in a January 2013 report the findings of a study of Danish workers. The Danish research explores the impact that changes in tax incentives for workplace retirement plans might have on worker saving behaviors. The Danish study also analyzed the impact of defaults in employer-provided pensions and government mandates on Danish savings patterns.
The Danish study, EBRI writes, found that most individuals did not change the amount of their voluntary contributions or savings in taxable accounts, but that an individual’s total savings immediately increased by 90 cents for every $1 increase in employer-provided pension contributions.
The study also examined the effect of a mandatory savings plan (MSP) that required all Danish citizens to contribute one percent of their earnings to a retirement savings account from 1998 until 2003. The report found that Danish workers saved what they were required to save, but no more.