A large group of households has too little readily available savings, warns the Central Planning Bureau. Too little is saved to build up capital, or the money is stuck in the owner’s house or the pension fund. This can be problematic in the event of financial setbacks.
The CPB advocates for wealth accumulation more freedom of choice and relaxation of requirements and rules regarding mortgages and pensions.
The financial buffers of a household naturally depend on the individual situation, income and the free choice to spend or save. It is optimal for households to save for their old age and have sufficient savings on hand for unforeseen setbacks. The size of the financial buffer differs per household and depends on age.
Nibud recommends a buffer of at least 3,500 to 6,000 euros. But almost a quarter of households have less than 2500 euros in reserve.
Home and retirement
The government can also help boost wealth by adjusting policies and rules on pensions and home ownership. A lot of money is stuck in the pension pots, due to the compulsory pension accrual for many employees, or in the bricks and the mortgage.
The CPB argues for more cohesion and coordination between pension and the owner-occupied home. Households with a lot of equity in their own home could accrue less compulsory pension. Young people could pay a lower pension contribution than the elderly. Lowering the mortgage repayment requirement to half of the home value gives households financial space to consume and to build a piggy bank, according to the CPB.
Such changes also involve risks, for example that some households eventually accrue too little pension, or are saddled with residual debts.
At the bottom end, households with low incomes and little wealth, a relaxation of wealth limits may offer a solution, for example in the case of forgiveness of local taxes. The capital limit to qualify for remission is now at 1000 euros for singles and 1500 for cohabitants, a higher limit would encourage saving.