Contractual Savings for Housing in relation to Pension Plans in the Netherlands
The current tax system in the Netherlands lengthens the balance sheets of households. The provision of a fiscal incentive for debt financing the purchase of one’s own dwelling implies a large mortgage debt. The implicit subsidy on pension savings implies a large amount of pension assets. These two phenomena together result in a large increase of net assets as well as net liabilities of Dutch households which increased the balances for these households. A mismatch between savings, financing needs, and income and expenses over the life cycle increases exposure to the financial sector, therefore making households more vulnerable to financial shocks.
This research seeks to better coordinate wealth accrual through pensions and home ownership. The research combines the fields of housing and pensions and looks at the introduction of Contractual Savings for Housing (CSH) in the Netherlands to better coordinate the wealth accrual of Dutch households. CSH in the context of this research refers to the ‘classical’ savings model, as used in Germany. It has a contractual savings system, whereby a pre-agreed amount is saved, and subsequently one is entitled to a loan of approximately 1,5 times the value of the accumulated savings. In line with the new Dutch coalition agreement, the research looks into substituting part of one’s pension savings for investment in housing for young house owners. This can then be used in a CSH-contract. We aim to better align the needs and preferences of individuals to the optimal life-cycle in terms of saving and old-age insurance.
We adopt a multidisciplinary approach: the research combines both legal and economic research methods. Furthermore, it exploits the experience that countries like Germany and the UK have had with such a system thus far. Using these methods, the research explores the economic and fiscal effects of introducing CSH in the Netherlands, thereby distinguishing between different tax frameworks.