Abstract
Measuring the effect of an unanticipated reduction in tax credits on pension savings, this paper shows that individuals tend to make extraordinary repayments on their debt when saving in retirement accounts becomes less
attractive. We conclude that tax-favoured retirement accounts could affect gross debt accumulation. In line with recent studies, we show that tax subsidies for saving in pension accounts only affect total individual savings to a limited extent, but unlike prior research this paper distinguishes between the effects on financial assets and liabilities. As a particular feature, we have gained access to comprehensive information on all mortgage loans in Denmark. Exploiting the exogenous shock to pension taxation, we demonstrate how a sharp reduction in voluntary pension savings is partly offset by increased repayments on mortgage loans.
attractive. We conclude that tax-favoured retirement accounts could affect gross debt accumulation. In line with recent studies, we show that tax subsidies for saving in pension accounts only affect total individual savings to a limited extent, but unlike prior research this paper distinguishes between the effects on financial assets and liabilities. As a particular feature, we have gained access to comprehensive information on all mortgage loans in Denmark. Exploiting the exogenous shock to pension taxation, we demonstrate how a sharp reduction in voluntary pension savings is partly offset by increased repayments on mortgage loans.
Original language | English |
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Place of Publication | København |
Publisher | Danmarks Nationalbank |
Number of pages | 36 |
Publication status | Published - Dec 2015 |
Series | Danmarks Nationalbank. Working Papers |
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Number | 101 |
ISSN | 1602-1193 |
Keywords
- Pension Savings
- Household debt
- Mortgage loans