DISCUSSION PAPER PI-9804
The Impact of Wealth on Consumption and Retirement
Behaviour in the U.K.
Housing and pension wealth are shown to be important determinants of
personal sector consumption and retirement behaviour in the UK. Housing
and state pension wealth have a positive e¤ect on consumption, while private
pension wealth promotes greater savings. Greater private defined benefit
pension wealth encourages earlier retirement, while greater defined contribution
pension wealth has the effect of delaying retirement. State pension wealth
appears to have no effect on the retirement decision. Other variables relating
to income, labour market and demographic status and spillovers from other
sectors are also shown to be important. The consumption equation forecasts
the late 1980s boom and the early 1990s slump in the UK better than other
models that disregard housing and pension wealth. A particularly important
cause of the boom was the huge private pension fund surpluses that accrued
as a result of the stock market boom of the 1980s.