Hostname: page-component-78c5997874-xbtfd Total loading time: 0 Render date: 2024-11-10T07:39:20.913Z Has data issue: false hasContentIssue false
  • English
  • Français

The UK Savings Gap

Published online by Cambridge University Press:  26 March 2020

Ehsan Khoman  and
Martin Weale
Martin Weale*
Affiliation:
National Institute of Economic and Social Research
*
m.weale@niesr.ac.uk
Get access Rights & Permissions [Opens in a new window]

Abstract

We set out a framework for measuring the adequacy of saving in the United Kingdom by assessing the absolute level of savings based on individual preferences of different ages. We examine this relationship between age and savings using data from the Expenditure and Food Survey 2004–5. We show that, while the level of national saving is about 8.4 percentage points of net national income lower than is required if one assumes that each cohort pays its own way, wealth holdings are considerably higher than are required on the same basis. Looking at household, rather than national saving, the current pattern of benefits on public sector pensions removes the need to save for old age. While perhaps £4000m of household wealth holding can be accounted for by bequest and other transfer motives, our results suggest excess wealth holding of around £1600m in 2004.

Keywords

Savings gaphousehold and national savingcapital accumulationbequests and transfer inter vivosD10D31D91E01E21
Type
Articles
Information
National Institute Economic Review , Volume 198 , October 2006 , pp. 97 - 111
Copyright
Copyright © 2006 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Blinder, A.S. (1988), ‘Comments on Chapter 1 and Chapter 2’, in Kessler, D. and Masson, A. (eds), Modelling the Accumulation and Distribution of Wealth, Oxford, Clarendon Press.Google Scholar
Browning, M. and Lusardi, A. (1996), ‘Household saving: micro theories and micro facts’, Journal of Economic Literature, 34, pp. 1797–1855.Google Scholar
Cardarelli, R.Sefton, J. and Kotlikoff, L.J. (2000), ‘Generational accounting in the UK’, Economic Journal, 110, 467, pp 547–574.CrossRefGoogle Scholar
Davies, J.B. and Shorrocks, A.F. (1999), ‘The distribution of wealth’, in Atkinson, A.B. and Bourguignon, F. (eds), Handbook of Income Distribution Vol 1, Amsterdam, Elsevier-North Holland.Google Scholar
Deaton, A. (1997), The Analysis of Household Surveys. A Micro-economic Approach to Development Policy, Johns Hopkins University Press.Google Scholar
Department of Work and Pensions (2006), ‘Security in retirement: towards a new pensions system’, http://www.dwp.gov.uk/%20pensionsreform/pdfs/white_paper_complete.pdfGoogle Scholar
Disney, R. (2006), ‘Household saving rates and the design of public pension programmes: cross-country evidence’, National Institute Economic Review, 198, October.CrossRefGoogle Scholar
Feldstein, M. (1974), ‘Social security, induced retirement and aggregate capital accumulation’, Journal of Political Economy, 82, pp. 905–926.CrossRefGoogle Scholar
Gale, W.G. and Scholz, J.K. (1994), ‘Intergenerational transfers and the accumulation of wealth’, Journal of Economic Perspectives, 8, pp. 145–160.CrossRefGoogle Scholar
Gokhale, J., Kotlikoff, L.J. and Sabelhaus, J. (1996), ‘Understanding the postwar decline in US saving: a cohort analysis’, Brookings Papers On Economic Activity, 1, Washington D.C., pp. 315–390.CrossRefGoogle Scholar
Kirsanova, T. and Sefton, J.A. (2006), ‘A comparison of national savings rates in the UK, US and Italy’, European Economic Review(forthcoming).CrossRefGoogle Scholar
Kotlikoff, L.J. (1989), ‘Intergenerational transfers and savings’, Journal of Economic Perspectives, 2, 2, pp. 41–58.CrossRefGoogle Scholar
Klevemarken, N.A. (2004), ‘On the wealth dynamics of Swedish families: 1984–1998’, Review of Income and Wealth, Series 50, pp. 469–492.CrossRefGoogle Scholar
Pensions Commission (2005), Implementing an Integrated Package of Pension Reforms, http://www.pensionscommission.org.uk/%20publications/2006/final-report/final_report.pdfGoogle Scholar
Pomerantz, O. and Weale, M.R. (2005), ‘Are we saving enough? The macroeconomics of the savings gap’, National Institute Economic Review, 191, January, pp. 79–93.CrossRefGoogle Scholar
Sefton, J.A. and Weale, M.R. (1995), Reconciliation of National Income and Expenditure, Cambridge, Cambridge University Press.Google Scholar
Solomou, S. and Weale, M.R. (1997), ‘Personal sector wealth in the United Kingdom’, Review of Income and Wealth, Series 43, pp. 297–318.CrossRefGoogle Scholar
Weil, P. (1993), ‘Precautionary saving and the permanent income hypothesis’, Review of Economic Studies, 60, 2, pp. 367–383.CrossRefGoogle Scholar
Yaari, M.E. (1965), ‘Uncertain lifetime, life insurance and the theory of the consumer’, Review of Economic Studies, 32, 2, pp. 137–150.CrossRefGoogle Scholar