Wednesday, October 21, 2015

Be very, very careful how you interpret the latest findings from the IFS about pensioner income

The Times make much out of a report from the IFS telling us what a great time pensioners in the UK are having.  I quote

Pensioners are enjoying higher incomes than people in work for the first time, research has revealed.
The “astonishing turnaround” in older people’s wealth over the past three decades means they are better off week-by-week than younger generations, said Paul Johnson, the director of the Institute for Fiscal Studies (IFS) think tank, which carried out the research.
Now the IFS is a very well respected and impartial organisation but sometimes I think it can analyse itself into a state of torpor.  For those with a Times subscription here is the link to the article.

If you delve into the details of the nice charts in the IFS presentation you soon find yourself in mind boggling complexity of analysis - see the simple equation at the top of the blog post.

The thing that worries me the most from the IFS analysis is that it assumes that retirees liquidate the value of their house over their remaining lifespan. Now this is a nice idea but the IFS fails to provide any suggestions of how this can be achieved.

For the intergenerational equity mob this reinforces all of their prejudices. For those who have a serious interest in the subject it is of little use. Dick Stroud.

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