Pension savings and government finance in the Netherlands
OECD Economic Studies No. 39, 2004/2. The large accumulated savings in funded pension schemes contribute significantly to the sustainability of government finance in the Netherlands. The implicit tax claim on pension wealth balances current public debt, and the expected rise in tax revenues from pension income compensates for more than half of the future burden of population ageing. The positive contribution of – past – pension savings to government finance does not necessarily imply that also future pension savings have a favourable impact on government finance. On the contrary, applying a general equilibrium OLG model for the Netherlands we find considerable positive effects of a downsizing of mandatory pensions on the government budget. The impact on the economy is ambiguous, however, and depends on which generations bear the burden of this pension reform.
This paper was presented at an OECD Workshop on "Tax-favoured retirement saving plans: their effect on private saving and future net tax revenues" held on 28 May 2004.
Long abstract
