How does pension saving change when individuals complete repayment of their mortgage?

Rowena Crawford ()
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Rowena Crawford: Institute for Fiscal Studies and Institute for Fiscal Studies

No W20/39, IFS Working Papers from Institute for Fiscal Studies

Abstract: We examine the extent to which owner-occupiers in their 50s and 60s change their private pension saving when they complete repayment of the mortgage on their primary residence. Using panel data from a household survey, the English Longitudinal Study of Ageing, we identify those who completed repayment of their mortgage as anticipated two years prior. Despite mortgage expenditures falling by over £200 per person on average, there is little resulting change in average pension saving. This is because only a small minority of individuals react – the probability of an individual increasing their monthly pension saving by more than £150 increases by only 5 percentage points on completing repayment of a mortgage. This suggests that if policymakers wish to influence behaviour in order to increase private pension saving, interventions targeted at those completing their mortgage repayment could be a tractable approach. Such individuals would be able to increase pension saving while maintaining spending at recent levels.

Date: 2020-12-01
New Economics Papers: this item is included in nep-age, nep-cwa, nep-his and nep-ure
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