Private Retirement Savings in Germany: The Structure of Tax Incentives and Annuitization

34 Pages Posted: 5 Mar 2008

See all articles by Hans Fehr

Hans Fehr

University of Würzburg - Institute of Economics and Social Sciences

Christian Habermann

University of Würzburg - Institute of Economics and Social Sciences

Date Written: March 1, 2008

Abstract

The present paper studies the growth, welfare and efficiency consequences of the recent introduction of tax-favored retirement accounts in Germany in a general equilibrium overlapping generations model with idiosyncratic lifespan and labor income uncertainty. We focus on the implicit differential taxation of specific savings motives, the mandatory annuitization of benefits and the impact of special provisions for low-income households. The simulations indicate that the reform improves overall economic efficiency by about 0.6 percent of aggregate resources, but welfare decreases significantly for future generations. Finally, we show that special provisions could be very effective in raising the participation of low-income households despite their low budgetary cost.

Keywords: individual retirement accounts, annuities, stochastic general equilibrium

JEL Classification: H55, J26

Suggested Citation

Fehr, Hans and Habermann, Christian, Private Retirement Savings in Germany: The Structure of Tax Incentives and Annuitization (March 1, 2008). CESifo Working Paper Series No. 2238, Available at SSRN: https://ssrn.com/abstract=1102964 or http://dx.doi.org/10.2139/ssrn.1102964

Hans Fehr (Contact Author)

University of Würzburg - Institute of Economics and Social Sciences ( email )

Sanderring 2
D-97070 Wuerzburg
Germany
0931- 31 29 72 (Phone)
0931- 888 71 29 (Fax)

Christian Habermann

University of Würzburg - Institute of Economics and Social Sciences ( email )

Sanderring 2
Wuerzburg, 97070
Germany

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