How Should Pensions be Taxed? Theoretical Considerations and the Scandinavian Experience

Torben M. Andersen

How should pensions be taxed? In many cases pension savings are usually taxed more leniently than other forms of savings. What is the rationale for this? And are those concerns best targeted via taxation or mandatory pension savings?

These issues are discussed with outset in the experience of the Scandinavian countries (Denmark and Sweden). These countries are also interesting because they have implemented a dual income taxation scheme; i.e. they pursue an ETT-taxation regime vis a vis pensions. It is argued that the incentive structure related to pension savings and retirement can not be seen independently from how private pensions (and savings more generally) affect public pensions via meanstesting.