When it comes to encouraging households to invest in financial markets, simplicity may be more effective than generous tax treatments. This is the observation that emerges from a comparison of four European savings and investments accounts (or SIAs, tax-advantaged investment accounts).
Italy’s Individual Savings Plans (PIRs) provide a full exemption from taxes on returns and inheritance, but are used by only 1.5% of adults. In Sweden instead, 52.3% of the adult population take advantage of ISKs, which apply a flat annual tax even when investments lose value. Between these two extremes are France’s PEA, with an adoption rate of 13.4%, and the UK’s ISA, at 39.2%, according to research we conducted for Equita, a private investment bank.
The difference appears to depend on how the instrument fits into the lives of savers. The most widely held products are the ones with no holding period requirements that are easy to understand and manage; they can also accommodate a broad range of financial assets. Less popular are savings plans designed primarily to channel capital toward specific sectors or regions.
Plenty of cash and few stocks
European households have large amounts of cash and few stocks, when compared to US data. In fact, deposits and cash make up 31% of their financial assets versus 14% in the US; stocks, held directly or through funds, constitute 37% while that figure is 47% in the US.
Although investing in stocks can deliver higher returns over the long term, broad and stable equity participation can also reduce the cost of capital for companies, deepen markets, and support IPOs, innovation, and long-term investment. Such investments can also limit procyclical capital withdrawals during periods of crisis. This is why the European Savings and Investments Union aims to remove obstacles such as regulatory fragmentation, low financial literacy, costs and tax compliance requirements, the limited availability of suitable products, and widespread risk aversion.
First, however, we need to understand why national portfolios differ so widely. How much do these variations depend on the structure of pension systems, tax treatment, the history of financial markets, and attitudes toward risk? And would specifically designed tax-advantaged instruments make any difference?
Four instruments, but two models
Our analysis first shows how strongly wealth allocation retains a national imprint. In Italy, the financial share of household wealth rose from 35% in 2011 to 46.2% in 2023, but the preference for liquidity is still structural: In 2024, cash and deposits made up 27.7% of financial assets, about twice that of Sweden. Directly held listed stocks, by contrast, represented just 3.7%.
The United Kingdom has an almost even distribution between financial and non-financial assets, largely thanks to a pension system that channels workers’ savings into the markets. In France, real estate predominates, while assurance-vie is the leading form of financial investment. Sweden stands out for high, stable equity participation even during crises.
A comparison of the four SIAs reveals two models. Italian PIRs and French PEAs are designed primarily to funnel savings into companies. They have a mandatory five-year holding period and require investments in Italy and in the European Union or European Economic Area, respectively. By contrast, ISKs and ISAs are built around savers’ needs: They have no holding-period or geographic restrictions and allow greater diversification.
Our results reflect this difference. The UK’s ISA, which exempts income and capital gains on contributions of up to £20,000 a year from tax, has accumulated £726 billion in assets. For Sweden’s ISK, investors do not need to calculate capital gains because their financial intermediary automatically applies an annual tax based on the account’s average value. With no contribution limits or tax filing requirements, 52.3% of Swedish adults have ISKs, which all told hold a total of €176 billion in assets.
The PIR lies at the opposite extreme. Despite offering the most generous tax treatment, this long-term savings plan counts only 1.5% of Italian adults as participants and holds about €19 billion in assets. Reasons for this limited adoption include investment restrictions, concentration risk, disappointing performance from Italian small caps, and competition from Italian government bonds and postal savings products.
The above comparison alone does not establish a causal relationship, but it points to a clear link: Simplicity, flexibility, and freedom of choice are associated with greater adoption than generous tax breaks alone. Significantly, 40% of ISK assets are invested in Swedish securities. In this case, support for the domestic market does not stem from a requirement, but from the instrument’s ability to engage a much broader group of savers.
A proposal for Italy
Based on this evidence, Italy could consider a flat-tax investment account inspired by Sweden’s ISK, which might include stocks, bonds, funds, and ETFs domiciled or listed in the European Economic Area. There would be no minimum holding periods or mandatory allocations by asset class. The financial intermediary would calculate and withhold the tax directly, relieving customers of tax filing requirements.
Under our proposal, the assumed return would be equal to the ECB’s main refinancing operations rate plus one percentage point. So for example, with an ECB rate of 3%, the tax would amount to 1.2% of the portfolio’s average value: €600 for a €50,000 account, regardless of its actual performance. Compared with Italy’s standard 26% tax rate, the new regime would become advantageous at returns above approximately 4.6%. This solution would be particularly favorable for savers in positive years, but they would have to pay taxes even when returns are zero or negative.
If a product is designed exclusively to channel resources toward companies, it risks failing to achieve sufficient scale. Instead savings plans that start from savers’ needs (diversification, liquidity, transparency, and ease of use) can indirectly have a stronger impact on capital markets.
Complexity should be treated as a real economic cost. Reducing the number of decisions, automating compliance requirements, making tax treatment easy to understand, and allowing investors to adjust their portfolios without losing their benefits: all these measures can have a decisive impact on adoption.
