Matthew Wakefield

Tax Reform and Retirement Saving Incentives: Take-Up of Stakeholder Pensions in the UK

In April 2001, the UK government introduced Stakeholder Pensions – a new private pension arrangement. The reform also changed the structure of tax-relieved pension contribution ceilings, increasing their generosity for lower-earners. We examine the impact of these changes on private pension coverage using individual level data. We use a difference-in-differences strategy with an estimator that is modified to allow for dichotomous outcomes. Contrary to the conventional wisdom that the Stakeholder Pension reforms had little or no impact on saving behaviour, our results indicate that the change to the contribution ceilings affected private pension coverage rates among lower-earners, especially among women.

Can Temptation Explain Housing Choices in Later Life

We use individual life-history data on twelve European countries to investigate the role of temptation in explaining the decision to become home-owners relatively late in life. The model we consider takes into account the standard motives for saving and investing in illiquid assets such as housing and individual retirement accounts, but recognizes that illiquid assets may be used by individuals who find it hard to procrastinate current consumption to control the temptation linked to having plenty of cash on hand. The evidence we produce is consistent with the notion that tempted individuals first resort to illiquid financial assets to control temptation, but as retirement age approaches they are more likely to use home-ownership as a commitment device.

House Prices and Home Ownership: a Cohort Analysis

England has very volatile house prices. We use pseudo-panel data spanning multiple house-price cycles over nearly forty years, to assess the extent to which house prices affect access to home ownership by age thirty, and whether differences in ownership rates persist. We find that ownership rates at age thirty have varied substantially, with this variation significantly related to prices. Measurement error problems - attenuation bias and other biases - complicate an analysis of the persistence of these differences in ownership. We use two methods - including one that develops the ideas of Deaton (1985) - to deal with this and find robust evidence that cohorts with low ownership rates at thirty close about 80% of the ownership gap by age forty.

Stockholding in the United Kingdom

This chapter provides empirical evidence on the portfolios of UK households.1 We give particular attention to holdings of stocks and shares and differentiate between direct holdings that can be self-traded and indirect holdings in unit trusts and mutual funds and in tax favoured personal equity plans (PEPs), and also holdings in private personal pension accounts. We argue that household portfolios in the United Kingdom share many features with those of other countries included in this analysis. Across households with different characteristics there are wide differences in ownership rates for stocks held directly and stocks held indirectly. But within the group of stockholders we find little evidence of systematic variations in the proportion of household wealth that is accounted for by stocks held either directly or in direct and indirect forms. Age, income and education are important factors in describing the level of financial wealth that households have, and the various assets that they hold.