While the empirical evidence tends to support some predictions of the life-cycle theory, a
number of puzzles remain: an ageing-consumption, an ageing-saving, a saving-capitalisation
and a saving-longevity puzzles have been put forward in the literature. This paper analyses
the links between these puzzles and develops a model relating usual life-cycle variables, social
transfers (public health care expenditures and the generosity of pension systems) to the level
of savings. A reduced-form model using a panel of 18 OECD countries is tested, confirming
the proposed explanations for the puzzles, together with other factors such as public deficits
(Ricardian equivalence) and the population structure. We found that the relative generosity of
welfare systems have a significant negative impact on household saving rate. It can also
explain why the increase in longevity does not have had in general a positive impact on the
household saving ratio.
