In this presentation, IFS researchers draw together the conclusions of a programme of research carried out over the last two years, which sheds light on individuals’ saving for retirement and how different sources of wealth are drawn on through retirement.
The extent to which people draw on their housing wealth in later life is an important issue, with implications for the living standards of current older individuals and their use of other financial resources, the likely bequests that will be received by younger generations, and policymakers’ assessment of the financial preparedness for later life of current younger individuals. Housing mobility at older age also has implications for the turnover and appropriateness of the housing stock.
There has been lots of recent research and debate on individuals’ accumulation of wealth for retirement, driven by the concern that younger generations are not saving enough. Much less attention, however, has been paid to how individuals use their wealth once in retirement. In this note, we summarise the findings of recent and new IFS research addressing this omission and considering the use of different components of wealth in retirement.
The ageing of the population is one of the biggest changes facing society today. People are living longer, remaining healthier at older ages, and working and engaging in society for longer. This is an achievement that should be celebrated, both in its own right and for the opportunities it presents, with older generations able to provide assistance to younger generations and pass down their accumulated experience and wisdom. However, such changes are, of course, not without challenges.
We are constantly being lectured about how we should save more for our retirements. Maybe we should. But what happens next? It’s all very well having assets when you get to retirement age, but that still leaves another 20 years or more to manage and make use of them. How we do that can have as much impact on living standards in retirement as the amount saved in the first place.
From tomorrow, a large proportion of private sector employees will pay more into their pensions – and their employers will have to contribute more too. This is the first of two planned steps in the next two years that will increase the minimum contributions that most employees and their employers will, by default, make to a workplace pension. This is all part of the government’s automatic enrolment policy aimed at increasing retirement saving.
Research on savings groups and financial intermediation in Malawi, joint with Professor Marcel Fafchamps, published as a CEPR Working Paper (12715).
https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12715
The Department for Work and Pensions today published the recommendations of its review into automatic enrolment. This focussed on issues around membership of, contributions to, and engagement with, workplace pensions. This observation looks at two specific measures – both of which are likely to boost the amounts going into workplace pensions – and the proposed trials of ways to boost pension saving among the self-employed who are not covered by automatic enrolment.
The nature of the relationship between lifetime income and saving rates is a longstanding empirical question and one that has been surprisingly difficult to answer. We use a new data set containing both individual survey data on wealth holdings and administrative data on earnings histories to examine this question.
This report examines changes in the distribution of household incomes in the UK, and the determinants and consequences of recent trends. This includes analysing not only
changes in average living standards, but also inequality in household incomes and measures of income poverty and deprivation.
BACKGROUND: Literature suggests that the higher the rate of time preference people have, the less likely they are to save for the future. Likewise, it has been hypothesised that rising rates of being overweight/obesity are associated with an increase in peoples' marginal rate of time preference.
Andrew Hood contributed an article to this bulletin titled 'The changing generosity of private pension provision and its differential effects across generations'
We put forward a method for estimating discount rates using wealth and income data. We build consumption from these data using the budget constraint. Consumption transitions yield discount rates by household groups. Applying this technique to a sample of older households, we find a similar distribution to those previously estimated using field data, though with a much lower mean than those found using experiments. Surprisingly, among this older population, patience is negatively correlated with education and numeracy. This goes against the positive correlation found for younger populations in experiments and some field studies. We discuss potential explanations for this result.
‘Retirement Incentives and Labor Supply’ in A. Woodland and J. Piggott (eds) Handbook of the Economics of Population Aging, Chapter 1, Vol 1B, Elsevier.
