Does Mandatory Saving Crowd out Voluntary Saving? Evidence from a Pension Reform

Svend E. Hougaard Jensen, Sigurdur P. Olafsson, Arnaldur Stefansson, Thorsteinn S. Sveinsson, Gylfi Zoega

Research output: Working paperResearch


Recently, mandatory pension contributions in Iceland were increased substantially in the private sector while remaining unchanged in the public sector. Taking this as a large natural experiment, this paper studies the effects of this change on households’ voluntary saving using comprehensive third-party reported information on tax-payers’
income, assets and debt for all taxpayers. Using difference-in-differences, we find that households do not reduce voluntary saving when faced with a rise in mandatory saving. Our results are confirmed by an event study of workers switching from the private sector to the public sector. Survey evidence suggests widespread ignorance about the pension system.
Original languageEnglish
Place of PublicationReykjavík
PublisherCentral Bank of Iceland
Number of pages64
Publication statusPublished - Aug 2023
SeriesCentral Bank of Iceland Working Paper


  • Pension reform
  • Occupational pensions
  • Saving
  • Retirement

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