Does a Decrease in Pension Taxes Increase Retirement Savings? An Experimental Analysis

Kay Blaufus, Michael Milde and Alexandra Spaeth

Public Finance Review, 2025, vol. 53, issue 6, 786-819

Abstract: In a series of experiments, we investigate if lowering the income tax rate on pensions increases savings. Our results show that reducing the tax rate on pensions has minimal impact on saving behavior. However, when we manipulate the current tax rate for savings deduction, subjects adjust their savings accordingly. This suggests that individuals tend to overlook the impact of income taxes on pensions. Furthermore, our findings highlight that governments can raise after-tax pensions without altering tax revenues by shifting from deferred to immediate pension tax systems.

Keywords: retirement savings; savings incentives; pension tax rate; tax uncertainty; deferred taxation (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:53:y:2025:i:6:p:786-819

DOI: 10.1177/10911421251335100

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