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Pension wealth and household saving: evidence from pension reforms in the UK

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Author Info
Orazio Attanasio () (Institute for Fiscal Studies and University College London)
Susanne Rohwedder

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Abstract

Using three major UK pension reforms as natural experiments we investigate the relationship between pension saving and discretionary private savings. Unlike most differences-in -differences approaches which rely on average differences between the control and the treatment group, we use economic theory to model the response of each individual household. The model permits us to use both time- series and cross-sectional variation in a consistent way to identify the behavioural response. The study is based on data from the Family Expenditure Survey. A measure of pension wealth is not observed, but we estimate it by applying the rules of the pension system to observed individual characteristics. The changes in pension wealth as a result of the reforms are substantial. The empirical analysis suggests that the earnings -related tier of the pension scheme has a negative impact on private savings with substitution elasticities approaching –1.0. The impact of the flat-rate tier of the scheme is found not to be significantly different from zero.

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Publisher Info
Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W01/21.

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Length: 34 pp
Date of creation: Sep 2001
Date of revision:
Handle: RePEc:ifs:ifsewp:01/21

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Find related papers by JEL classification:
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Mervyn A. King & Louis Dicks-Mireaux, 1982. "Asset Holdings and the Life Cycle," NBER Working Papers 0614, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Orazio P. Attanasio & Agar Brugiavini, 2003. "Social Security And Households' Saving," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 1075-1119, August. [Downloadable!] (restricted)
  3. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct. [Downloadable!] (restricted)
  4. Dilnot, Andrew & Disney, Richard & Johnson, Paul & Whitehouse, Edward, 1994. "Pensions policy in the UK: An economic analysis," MPRA Paper 10478, University Library of Munich, Germany. [Downloadable!]
  5. William G. Gale, 1998. "The Effects of Pensions on Household Wealth: A Reevaluation of Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 706-723, August. [Downloadable!] (restricted)
  6. R Disney & C Emmerson & M Wakefield, 2001. "Pension reform and saving in Britain," Oxford Review of Economic Policy, Oxford University Press, vol. 17(1), pages 70-94, Spring.
  7. Eric M. Engen & William G. Gale, 1997. "Effects of Social Security reform on private and national saving," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, issue Jun, pages 103-142. [Downloadable!]
  8. Jappelli, Tullio, 1995. "Does social security reduce the accumulation of private wealth? Evidence from Italian survey data," Ricerche Economiche, Elsevier, vol. 49(1), pages 1-31, March. [Downloadable!] (restricted)
  9. James Banks & Carl Emmerson, 2000. "Public and private pension spending: principles, practice and the need for reform," Fiscal Studies, Institute for Fiscal Studies, vol. 21(1), pages 1-63, March. [Downloadable!]
  10. King, M A & Dicks-Mireaux, L-D L, 1982. "Asset Holdings and the Life-Cycle," Economic Journal, Royal Economic Society, vol. 92(366), pages 247-67, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Viola Angelini & Peter Simmons, . "Housing Debt, Employment Risk and Consumption," Discussion Papers 05/07, Department of Economics, University of York. [Downloadable!]
  2. Garry F. Barrett & Yi-Ping Tseng, 2008. "Retirement Saving in Australia," Canadian Public Policy, University of Toronto Press, vol. 34(s1), pages 177-193, November. [Downloadable!] (restricted)
    Other versions:
  3. Lucas Bretschger & Karen Pittel, 2005. "Innovative investments, natural resources, and intergenerational fairness : are pension funds good for sustainable development?," Economics working paper series 05/36, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
    Other versions:
  4. Maarten C.J. van Rooij & Clemens J.M. Kool & Henriette M. Prast, 2004. "Risk-return preferences in the pension domain: are people able to choose?," Working Papers 05-04, Utrecht School of Economics. [Downloadable!]
    Other versions:
  5. Barry Bosworth & Gary Burtless, 2004. "Supply-Side Consequences Of Social Security Reform: Impacts On Saving And Employment," Working Papers, Center for Retirement Research at Boston College 2004-01, Center for Retirement Research. [Downloadable!]
  6. Renata Bottazzi & Tullio Jappelli & Mario Padula, 2006. "Retirement Expectations, Pension Reforms, and Their Impact on Private Wealth Accumulation," CFS Working Paper Series 2006/10, Center for Financial Studies. [Downloadable!]
    Other versions:
  7. Werner Dirschmid & Ernst Glatzer, 2004. "Determinants of the Household Saving Rate in Austria," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 4, pages 25-38, December. [Downloadable!]
  8. Bottazzi, Renata & Jappelli, Tullio & Padula, Mario, 2005. "Retirement Expectations, Pension Reforms and Their Effect on Private Wealth Accumulation," CEPR Discussion Papers 4882, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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This page was last updated on 2009-10-31.

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