Individual pension savings could be affected by mortgages crowding out other types of long term investments according to NIESR research for the ABI.
After closely monitoring the savings trends of homes with mortgages, the findings revealed a fall in the savings rate which was both ‘economically and statistically significant’. This, it claimed, equates to a 15% drop in private pension income.
In comparison to similar economies, NIESR also stated that UK homes hold a more significant proportion of wealth in their property, a factor which they went on to calculate the impact of.
Commenting on the findings of the report was co-author of the report, Dr Monique Bell. The Associate Research Director of NIESR highlighted the UK’s dependence on housing as an investment, as well as the potential benefits for the economy if this was transferred to more productive assets.
“This research helps us to understand how much UK households’ overreliance on housing as a form of saving and investment is affecting their own income at retirement, and the UK economy as a whole. Policy makers would do well to examine more closely the relationship between the UK’s long-standing productivity weakness and incentives to invest in housing rather than productive assets.”
Also sharing her view on this was Yvonne Braun, ABI’s Director of Policy and Long-Term Savings. In order to ensure individuals are financially prepared for the future, she highlighted the need to focus on a retirement savings plan as well as a home.
“This research clearly demonstrates the value of the long-term savings industry. The way savings in pensions are actively invested in businesses and the real economy is good for jobs, productivity and GDP growth. The research also raises questions about the impact the high cost of housing in the UK has on people’s ability to save for retirement. As important as a home is, it can’t replace a retirement savings plan. More work and research in this area is vital so we can develop a more balanced and holistic approach to all forms of long-term savings.”
