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The impact of wealth on consumption and retirement behaviour in the UK

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  • David Blake

Abstract

Housing and pension wealth are shown to be important determinants of personal sector consumption and retirement behaviour in the UK. Housing and state pension wealth have a positive effect on consumption, while private pension wealth promotes greater savings. Greater private defined benefit pension wealth encourages earlier retirement, while greater de¯ned contribution pension wealth has the e®ect of delaying retirement. State pension wealth appears to have no effect on the retirement decision. Other variables relating to income, labour market and demographic status and spillovers from other sectors are also shown to be important. The consumption equation forecasts the late 1980s boom and the early 1990s slump in the UK better than other models that disregard housing and pension wealth. A particularly important cause of the boom was the huge private pension fund surpluses that accrued as a result of the stock market boom of the 1980s.

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File URL: http://eprints.lse.ac.uk/24949/
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Bibliographic Info

Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 24949.

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Length: 47 pages
Date of creation: Oct 2002
Date of revision:
Handle: RePEc:ehl:lserod:24949

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Keywords: Merton model; Consumption; Retirement; Financial wealth; Housing wealth; Pension wealth; Human capital;

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Cited by:
  1. Robert-Paul Berben & Kerstin Bernoth & Mauro Mastrogiacomo, 2007. "Households' response to wealth changes: do gins or losses make a difference?," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Proceedings of the IFC Conference on "Measuring the financial position of the household sector", Basel, 30-31 August 2006 - Volume 1, volume 25, pages 145-160 Bank for International Settlements.
  2. Allard Bruinshoofd & Sybille Grob, 2006. "Do changes in pension incentives affect retirement? A stated preferences approach to Dutch retirement consideration," DNB Working Papers 115, Netherlands Central Bank, Research Department.
  3. Aranki, Ted & Macchiarelli, Corrado, 2013. "Employment duration and shifts into retirement in the EU," Working Paper Series 1517, European Central Bank.
  4. Torben Andersen & Mikkel Hermansen, 2014. "Durable consumption, saving and retirement," Journal of Population Economics, Springer, vol. 27(3), pages 825-840, July.

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