Abstract
Investing in personal pensions and in private homeownership are the two main investment decisions consumers make over their life cycle with profound implications for their old-age arrangements. With the demographic change ahead, these two sources of additional old-age income will gain in importance in the future. As the Household Finance and Consumption Survey (HFCS) shows, real assets account for the main share in total household assets, with private homeownership representing the asset type which carries the greatest weight for most of EU Member States. In comparison, voluntary pensions and whole-life insurance play only a minor, in many countries even an insignificant role in households’ asset allocation. In addition, there is a positive correlation for both classes of assets with income and age. To enable low-income households in particular to increase participation in both private homeownership and private pensions, Member States apply a broad variety of policies. They can be classified as market-creating, market-correcting or market-compensating social policies. They complement both traditional policies to correct for market failures in financial markets as well as traditional redistributive social policies. However, to date, there is no coherent approach to either objectives or instruments adopted or to the interrelationship between promoting private homeownership and personal pensions within single Member States, let alone across the EU.
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Notes
- 1.
According to the OECD (2017a), the “replacement rate is defined as (…) pension entitlement divided by (…) pre-retirement earnings. It measures how effectively a pension system provides a retirement income to replace earnings, the main source of income before retirement”.
- 2.
They are a result of the research project “Integrating Residential Property with Private Pensions Provision in the EU” funded by the EU Commission, DG Employment, Social Affairs and Inclusion, VP/2014/014/0037.
- 3.
“Real assets include the value of the household main residence for homeowners, other real estate property, vehicles, valuables (such as jewelry, works of art, antiques, etc.) and of self-employment businesses. Financial assets include deposits (sight and saving accounts), mutual funds, bonds, shares, money owed to the households, value of voluntary pension plans and whole life insurance policies of household members and other financial assets item – which includes private non-self-employment businesses, assets in managed accounts and other types of financial assets” (HFCS 2017, 2nd wave, Table D1).
- 4.
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Eckardt, M. (2018). Personal Pensions and Homeownership in the EU: An Overview. In: Eckardt, M., Dötsch, J., Okruch, S. (eds) Old-Age Provision and Homeownership – Fiscal Incentives and Other Public Policy Options. Springer, Cham. https://doi.org/10.1007/978-3-319-75211-2_1
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