UK – The head of the Pension Commission, Adair Turner, has outlined his ideas about the links between the UK housing market and retirement savings.
“The higher the level of house prices relative to average earnings, the greater is the intergenerational consumption resource transfer which will tend to be achieved via house purchase and sale,” Turner stated in a lecture at the London School of Economics, where he is a visiting Professor.
“And the lower therefore is the degree of resource transfer we should expect to see achieved thought the total pension system.”
He added: “There is, I think, evidence that this is happening in the UK.” He saw an “endless cascade” of windfall winners and losers in the property market
The comments came as the International Monetary Fund has focused on the impact of housing on retirement incomes in the UK. It quoted an unnamed member of the Commission saying that “pension gaps are not necessarily matched by housing assets across individuals”.
“Asked about the exclusion of housing from the calculation of the saving gap, the Commission member explained that, with sharply higher house prices, people can only afford to buy houses later in life,” the IMF said.
It continued: “Future house values are highly uncertain particularly insofar as they may be affected by demographics themselves, and pension gaps are not necessarily matched by housing assets across individuals.”
Turner said the Commission was considering looking at the whole picture of savings in the UK – partly in response to criticism levelled at it following its interim report last October.
He said the Commission would publish “some sort of paper” in the next few months.