In Italy, as in many other countries, we have specific tax benefits for contributing to certain financial instruments geared towards retirement.
We can contribute up to 5,000€/year and subtract that amount from our taxable income. Also, capital gains on this money are taxed at 20% rather than the usual 26%.
However, these financial instruments are plagued with commissions and other ways of taking your money away. A typical setup is that every year you pay 30€ + 1,45% of the total value of your portfolio. Furthermore, because of how these financial instruments are structured, you will not be able to recover all the money that you have put in. The rules for withdrawals are very complicated but let us assume that you will be able to get back only 85% of the value of your portfolio calculated when you are 65. Also, these withdrawals are taxed at a rate of 12% (independent from your total income).
Also, you cannot choose asset allocation on your own and you have to select one of their pre-defined options. The typical stock-oriented option has an annualized return of about 4% (after capital gain tax) in the last 20 years.
It sounds like a total ripoff to me but the tax benefits are substantial. I am 29, assuming that I would contribute 5k every year until 65 and a 43% marginal tax rate on those 5k, would I still be better off just paying 43% tax on those 5k and buying a non-advantaged index fund / ETF? On this money, I would have to pay 26% capital gain tax on withdrawals, but no income tax.
EDIT: In case you want to look these things up, these schemes are called "Fondi pensione aperti" (FPA), here is an example (unfortunately in italian)