Monday, July 19, 2010

Landmark report about the impact of age and education on the distribution of wealth

“What does the distribution of wealth tell us about future retirement resources?”

This report was produced by the IFS for the DWP. It is a well researched document and provides a valuable insight into the ownership of wealth in the UK. It is a long report, 90 pages, stuffed full of data.

As an example I have showed two of the charts that illustrate the huge difference in the wealth holding of the UK population.

The analysts have done an excellent job trying to quantify the impact of the recession on the wealth holdings by the age and education of the person. Just look at the difference between the p25 and p75 gross wealth for the 55-64 year olds.

I thought this was an interesting quote and comes to a completely opposite conclusion to what I would have thought.

On average, we estimate that most households will have lost only a small fraction of their gross wealth. However, the proportion of net wealth lost is likely to have been higher for younger households – this is because their gross housing wealth (which will be affected by house price changes) tends to be largely matched by mortgage debt (the value of which would remain the same even if house prices fell) and thus their net wealth position tends to be more exposed to house price falls

You have to be careful with the definition of "low education" that is defined as having no educational or vocational qualifications. Remember that a lot of older people left school at 15, some at 14, but I would bet that their reading and numerical capability is a lot better than many young people who are defined as having a mid eduction.

A must download report. Dick Stroud

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