A new study ranks the United States as “below average” in mutual fund tax incentives and regulation when compared with other industrialized nations.
“Markets vary in their policies to give people incentive to invest, but many markets have taken important steps to motivate large numbers of ordinary people to invest for their futures, from creating special tax wrappers to automatically enrolling workers in defined-contribution retirement systems,” Morningstar said in its report.
Researchers scored each country based on key categories: policies that incentivize individuals to invest for their futures, regulatory requirements for operations and distribution, governance, and regulatory structure.
The U.S encourages investing mostly through tax incentives for retirement accounts, but since these accounts are linked to employers, and many employers do not offer plans, many Americans are not investing enough for their retirements, they argue.
“In fact, around one-third of Americans have invested little or nothing for their post-working years.”
The Netherlands, Sweden, and the United Kingdom took the top spots in this year’s report, while the United States was joined by Australia, Canada, and New Zealand at the bottom.
Regulation and Taxation Scorecard
TOP
| Netherlands |
| Sweden |
| United Kingdom |
ABOVE AVERAGE
| Belgium |
| Finland |
| Norway |
AVERAGE
| Denmark |
| France |
| Germany |
| Hong Kong |
| India |
| Italy |
| Korea |
| Mexico |
| Singapore |
| South Africa |
| Spain |
| Switzerland |
| Taiwan |
| Thailand |
BELOW AVERAGE
| Australia |
| Canada |
| China |
| Japan |
| New Zealand |
| United States |
“When assessing incentives to invest, we included whether markets have mandates or auto-enrollment practices to ensure that most working people save for retirement, and we also examined tax incentives,” the report added.
Additionally, Morningstar solely considered the perspective of a fund investor.
“A lower tax rate is better than a higher one, and tax incentives that reward long-term investing are better than policies that do not. Further, tax incentives that distort preferences for one product over another or encourage investors to eschew the best investment in favor of the most tax-efficient are frowned upon.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
