Policy pushes and the public's desire to own a home is resulting in a 15% reduced private pension income at retirement, research has suggested.
Households with mortgages see their savings hindered by the need to keep up the regular payments, according to a joint report by the National Institute of Economic and Social Research (NIESR) and the Association of British Insurers (ABI).
These costs are "crowding out other forms of long-term savings and investment, with potentially significant repercussions for individual pension savings but also for the UK economy as a whole".
The conclusions - made in Is an Englishman's home his pension? - are based on an analysis of the British Household Panel Survey, which covers 10,000 individuals each year between 1991 and 2012, and allowed the two firms to track changes in behaviour.
For "unconstrained investors" who have enough cash to buy a home without a mortgage, there was no noticeable change in savings behaviour after buying a home.
Yet, for those that did require a mortgage, there was "an economically and statistically significant decline" in the average savings rate of five percentage points to 4%, persisting for at least a decade after the purchase of a home.
This then led to an estimated reduction of £390 or 15% in average private pension income, the report added.
Overall, savers are approaching homes as a source of income in retirement, noting houses have been "one of the best performing large asset classes over the last 20 years, even before generous tax treatment is taken into account".
"This may encourage some individuals to see their home as a form of pension asset, at the expense of lower long-term savings in real economy assets," the report added.
NIESR associate research director and co-author of the report Dr Monique Ebell called on the government to carefully consider the trend.
"This research helps us to understand how much UK households' overreliance on housing as a form of saving and investment is affecting their own income at retirement, and the UK economy as a whole," she said. "Policymakers would do well to examine more closely the relationship between the UK's long-standing productivity weakness and incentives to invest in housing rather than productive assets."
ABI director of policy for long-term savings and protection Yvonne Braun added more research was needed to understand the correlation.
"The research also raises questions about the impact the high cost of housing in the UK has on people's ability to save for retirement," she said. "As important as a home is, it can't replace a retirement savings plan. More work and research in this area is vital so we can develop a more balanced and holistic approach to all forms of long-term savings."
