Economics – Microeconomic decision-makers - Households | e-Consult
Microeconomic decision-makers - Households (1 questions)
Government policies significantly shape household saving and borrowing behavior, with varying impacts across age groups. These policies can encourage saving, discourage borrowing, or provide financial support.
Young Adults: Tax incentives for saving (e.g., ISA – Individual Savings Account) can encourage young adults to start saving early. Student loan schemes (often with subsidized interest rates) facilitate access to education but also create debt. Policies promoting first-time buyer schemes (e.g., stamp duty relief) can encourage homeownership.
Middle Age: Pension schemes (e.g., auto-enrolment) encourage saving for retirement. Tax relief on pension contributions incentivizes saving. Policies supporting homeownership (e.g., tax breaks on mortgage interest) can influence borrowing decisions.
Retirement: State pensions provide a basic level of income. Tax policies affecting pension income (e.g., tax relief on pension withdrawals) influence retirees' financial security. Healthcare policies (e.g., subsidized healthcare) can reduce healthcare costs and improve financial well-being.
Specific Examples:
- Auto-enrolment pension schemes: This policy automatically enrolls employees into a workplace pension, encouraging saving for retirement, particularly benefiting middle-aged workers.
- Lifetime ISA (LISA): This scheme provides a government bonus for saving up to £4,000 per year, benefiting young adults saving for a first home or retirement.
- Tax relief on pension contributions: This incentivizes saving for retirement across all age groups.