The late 1980s saw a dramatic fall in personal saving rates in Britain and the United States which attracted the attention of academics and policymakers alike.

In this paper we ask whether households are saving enough for their retirement.

We argue that once one departs from simple classroom example, or 'stripped down life-cycle model', the empirical model for consumption growth can be made flexible enough to fit the main features of the data.

The study, using the 1988-89 Retirement Survey in Britain: (i) estimates expenditure on housing relative to income for the sample aged 55-69, (ii) simulates optimal housing/consumption allocations for a simple life cycle model and (iii) examines the relationship between 'excess' holdings of housing, financial dissaving and other portfolio behaviour subsequent to retirement.

The taxation of savings in the UK is in a mess and the IFS Capital Taxes Group, set up in 1987 and chaired by Malcolm Gammie of Linklaters & Paines, makes proposals which would considerably simplify the system. Its two principal proposals, which are outlined in this report, are for an extension of the current PEP and TESSA regimes to all personal savings and the introduction of an allowance for the cost of equity finance.

Very little is known about how households hold their savings, if they have any at all. This study shows how the amount and nature of household saving and wealth vary across different household types.