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Non-take-up of tax-favored savings plans: Evidence from Dutch employees by Rob Alessie; Stefan Hochguertel; Arthur van Soest is a Social Sciences article available to read on EtoBox.

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Since the early 1990s, the Dutch tax system allows for a tax-favored form of risk-free savings through employer-sponsored savings plans (ESSPs). Under some conditions and up to a certain amount, the contributions to this plan are tax-deductible, and the returns as well as the withdrawals are tax-free. This makes these plans extremely attractive, with real after-tax returns by far exceeding the returns to other financial assets such as risk-free saving accounts or stocks and bonds. According to standard economic theory, those who have access to this type of savings should participate in them and hold the maximum tax-favored amount, provided they have enough financial wealth that they can allocate to their own choice. In this paper, we analyze data on participation and amounts held in ESSPs for employees who have access to the asset, investigating the relationship with background characteristics and other forms of savings. We find that people who are likely to face binding liquidity constraints less often buy ESSPs and, if they buy them, more often use them as a substitute for other savings. The results also provide evidence of financial decision-making that is not driven by standard

Who reads Non-take-up of tax-favored savings plans: Evidence from Dutch employees?

Author

Rob Alessie; Stefan Hochguertel; Arthur van Soest

Publisher

Elsevier Science; Elsevier ; North-Holland Publ Co; Elsevier BV (ISSN 0167-4870)

Published

2006

Language

EN

Field

Social Sciences