UK – The Bank of England says the closure of defined benefit occupational pension schemes has added to the recent “upward pressure” on house prices in the UK.

The bank’s chief economist Charles Bean said that “increased longevity and falls in equity prices have led to the closure of many defined benefit company pension schemes, with the attendant transfer of risk from employer to employee”.

“Part of the response to that has been increased investment in real estate and an expansion of ‘buy-to-let’ as a way of providing for retirement, thus adding to the recent upward pressure on house prices.”

According to mortgage lender the Nationwide Building Society, the annual rate of real estate price growth was 20.3% in July.

Speaking at a symposium on global demographic change organised by the Federal Reserve Bank of Kansas City, Bean said that governments may be reluctant to act immediately to plug a financing gap on retirement plans because of the “slow burn nature'' of the problem.

“Decisive action may only then be triggered as public debt spirals and financial markets start worrying about the possibility of default,'' Bean said. “Abrupt movement in asset prices and sharp movements in savings behaviour in response to actual or expected policy changes could be the result.”

Federal Reserve chairman Alan Greenspan told the same meeting that “tough policy choices lie ahead” on pensions and the ageing population in the US.

"As a nation, we owe it to our retirees to promise only the benefits that can be delivered," Greenspan said in opening remarks.

"If we have promised more than our economy has the ability to deliver, as I fear we may have, we must recalibrate our public programs so that pending retirees have time to adjust through other channels," he said. "If we delay, the adjustments could be abrupt and painful."