Occupational pensions, macroprudential limits and the financial position of the self-employed
“Tighter borrowing restrictions in the mortgage market do not crowd out additional pension saving for self-employed”
Tightened borrowing restrictions, such as lower macroprudential limits on the loan-tovalue ratio or the debt-service-to-income ratio, make it relatively harder for many Dutch households to obtain a mortgage in recent years. We find no contradiction to the current policy aim of increasing pension saving of self-employed individuals. Whereas the self-employed are less likely to get a mortgage, and their borrowing is more sensitive to changes in restrictions compared to employees, in particular at the lower end of the income distribution, those self-employed that succeed to borrow tend to be older and wealthier, and they borrow more. However, the larger debt positions of the self-employed, before retirement, are associated with higher undiversifiable risk of a housing market downturn.
Key Takeaways for the Industry
- Low-income, self-employed individuals would enjoy limited benefits from an occupational pension as social security (AOW) offers decent replacement rates for lower incomes.
- Middle- and high-income self-employed individuals could benefit from an occupational pension without incurring extra debt even if borrowing limits are prudentially set.
Want to know more?
Read the paper ‘Occupational pensions, macroprudential limits and the financial position of the self-employed’ by Francesco G. Caloia (VU, DNB), Stefan Hochguertel (VU) en Mauro Mastrogiacomo (VU, DNB).