This paper analyzes the interconnections of underreported earnings, savings and oldage pension with the help of a most simple, elementary model. The workers can be divided into three groups: 1) well-paid who report their full earnings, 2) well-paid who report only the minimum earnings (evaders)...

To defend myopic workers against themselves, the government introduces a mandatory system but to help savers, it adds tax-favored retirement accounts. In a very simple model, where benefits are proportional to contributions, we compare three extreme systems: (i) the pure mandatory system, (ii)...

Nonfinancial defined contribution (NDC) pension systems have recently become popular because they provide the strong incentives of the private funded systems without requiring a difficult transition period. Using the framework of mechanism design, these systems have theoretically been criticized...

Though the Hungarian pension system has been suffering from many erroneous rules, in the present paper we confine our attention to the rules of retirement in Hungary since 1990. In every pension system, there exist two rules which determine how the lifetime contribution (which is approximately...

There exists a wide variety of tax treatments of pensions across the world. And the reasons for such a range of regimes are not clear. This note reviews the general principles of pension taxes and analyses the theoretical foundations of why pension incomes ought to be taxed specifically. To do...

Mandatory pension systems only partially replace old-age income, therefore the government also operates a voluntary pension system, where savings are matched by government grants. Accounting for the resulting tax expenditure, our models describe the income flow from shortsighted to farsighted...

There exists a wide variety of tax treatments of pensions across the world. And the reasons for such a range of regimes are not clear. This note reviews the general principles of pension taxes and analyses the theoretical foundations of why pension incomes ought to be taxed specifically. To do...

In 2011, the Hungarian government introduced seniority pensions (Female40): females, who have been accumulating at least 40 years of eligibility (related to the length of contributions), can retire at any age without actuarial benefit reduction. The elimination of other early retirement scheme...

In his seminal model (Feldstein, 1985), the government operates a social security system to counter the representative worker's myopia. (i) For a complete myope, he determined a sizable optimal tax rate (and the corresponding benefit level). (ii) For a partially shortsighted worker, he...

This paper surveys the most significant problems of the pension systems of EU11 countries. These nations had to transform their old-age social security systems after replacing a state-socialist economic order with a capitalist one. Stressing common as well as specific features, our paper...