The central purpose of this paper is to provide estimates of the implicit fiscal asset, as well as of the evolution over time of fiscal costs and benefits related to tax-favoured pension regimes in several OECD countries, taking into account current and future contributions, asset accumulation and withdrawals, all of which will be strongly influenced by future demographic developments. The paper also examines whether governments should expect sizeable net tax revenues as large cohorts of workers who benefit from tax exemptions reach retirement and begin relying on taxable pension benefits to finance consumption.
Section 1 discusses the methodology and main assumptions. Section 2 presents the main results of projecting net fiscal revenues arising from tax-favoured schemes over the period 2000-2005 and examines the extent to which alternative assumptions on saving diversion affect those results. Finally, Section 3 explores a number of policy options with particular emphasis on factors potentially affecting the effectiveness of tax-favoured pension schemes in boosting private saving.