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Cash and Pensions: Have the elderly in England saved optimally for retirement?

Author

Listed:
  • Rowena Crawford

    (Institute for Fiscal Studies and Institute for Fiscal Studies)

  • Cormac O'Dea

    (Institute for Fiscal Studies and Yale University)

Abstract

Using a model where households can save in either a safe asset or in an illiquid, tax-advantaged pension, we assess the extent to which those who recently reached the state pension age in the UK have saved optimally for retirement. The policy environment specified closely matches that prevailing in the UK. Using the model and administrative data linked with survey data from the English Longitudinal Study of Ageing, an optimal level of wealth is calculated for each household. This is compared to the levels of wealth observed in the data. Our results show that, for those born in the 1940s, the vast majority of households have wealth levels far greater than necessary to maintain their living standards into and through retirement.

Suggested Citation

  • Rowena Crawford & Cormac O'Dea, 2014. "Cash and Pensions: Have the elderly in England saved optimally for retirement?," IFS Working Papers W14/22, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:ifsewp:14/22
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    Cited by:

    1. Rowena Crawford & Soumaya Keynes & Gemma Tetlow, 2014. "From Me to You? How the UK State Pension System Redistributes," IFS Working Papers W14/20, Institute for Fiscal Studies.
    2. Rowena Crawford & Andrew Hood, 2015. "A tale of three distributions: inheritances, wealth and lifetime income," IFS Working Papers W15/14, Institute for Fiscal Studies.
    3. Ricky Kanabar, 2024. "Assortative mating and wealth inequality in Great Britain: evidence from the baby boomer and Gen X cohorts," CEPEO Working Paper Series 24-07, UCL Centre for Education Policy and Equalising Opportunities, revised Oct 2024.
    4. Cormac O'Dea, 2018. "Insurance, Efficiency and the Design of Public Pensions," 2018 Meeting Papers 1037, Society for Economic Dynamics.
    5. Kanabar, Ricky, 2015. "Post-retirement labour supply in England," The Journal of the Economics of Ageing, Elsevier, vol. 6(C), pages 123-132.
    6. Rowena Crawford & Cormac O'Dea, 2014. "Retirement sorted? The adequacy and optimality of wealth among the near-retired," IFS Working Papers W14/23, Institute for Fiscal Studies.
    7. Kalwij, Adriaan & Kanabar, Ricky, 2022. "State Pension eligibility age and retirement behaviour: evidence from the United Kingdom Household Longitudinal Study," ISER Working Paper Series 2022-05, Institute for Social and Economic Research.

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