Funded pensions face two main challenges in several European countries:
First, due to means-testing of basic, public benefits, the effective return on occupational retirement savings may be very low, even negative.
Second, in anticipation of violations of the rules stipulated by the fiscal framework in the EU, member states might feel tempted to frontload the revenues associated with taxation of pension funds.
In this lecture, which I was invited to give by the so-called Finansforbundet University, I use Denmark as a case study for illustrating these challenges.
Indeed, I argue that in the absence of a solution to the former problem, Denmark's status of being "best in class" may be seriously challenged.
Specifically, the structure of the talk is as follows:
First, I seek to answer how key fiscal and macroeconomic performance indicators would respond if contributions to funded pensions were phased out as a result of weak incentives to contribute to the schemes.
Second, depending on the government’s farsightedness and the fiscal restraint being exercised, I show how frontloading of tax revenues from pension income would affect the sustainability of public finances.
My lecture can be seen here.
A list of other recent talks as part of my dissemination activities can be found here.