Life–cycle saving patterns and pension arrangements in the U.K.

Abstract

This paper provides detailed empirical evidence on household saving for the U.K. and relates the observed patterns to the institutional environment, paying special attention to pensions. As such, it contributes to an international comparison project on Household Savings and Pension Policy edited by Axel Börsch-Supan, and considerable effort is made to construct comparable measures of savings and related variables across countries. Our main data source is the Family Expenditure Survey from which we draw a 22-year long time series of cross-sections allowing us to observe different date-of-birth cohorts over a substantial time period. Given data limitations, our analysis mainly relies on measuring savings as the residual between income and consumption expenditures. In the discussion of the observed profiles we point out phenomena that are particular to the U.K., such as the “retirement savings puzzle”. We discuss in detail pension arrangements and their evolution over time, as they are likely to have a fairly strong impact on household savings behaviour which is still little understood.