Press Release
Inheritances have not increased wealth
inequality among older households
Inheritances and large gifts received by English individuals born between the
1920s and 1950s do not appear to have increased the degree of inequality in
their wealth holdings. The already wealthy do receive much bigger
inheritances than the less wealthy, but what they receive is smaller relative to
their other wealth holdings. So the effect is not to increase the overall level of
wealth inequality. This is the main finding of new IFS research, published
today as part of English Longitudinal Study of Ageing (ELSA) Wave 6 Report,
and funded by the IFS Retirement Saving Consortium with support from the
Economic and Social Research Council. ELSA is funded by the National
Institute of Aging in the US and a consortium of UK government departments.
The analysis uses new data from ELSA to explore the prevalence and size of
inheritances and gifts received by those born between the 1920s and 1950s,
and the contribution that these wealth transfers could have made to current
wealth holdings (which is defined here as all private wealth, including
housing, but excluding that held in private pensions). Key findings include:
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Embargo
Until 0.01 am
Thursday 23rd October
2014
Contacts
Bonnie Brimstone
Institute for Fiscal Studies
020 7291 4800 / 07730
667013
28% of individuals born between the 1920s and 1950s report having
received at least one inheritance in the past, while 7% report having
received at least one gift worth more than £1,000 (in 2012 prices).
There is considerable variation in the size of inheritances and gifts
received. The median total value of inheritances received was
£34,540 (in 2012 prices), 15% of recipients received less than £5,000
in total, while over 10% received more than £200,000 in total.
Inheritances are more likely to have been received by, and are on
average larger for, those with higher levels of education (than those
with lower levels of education) and those with higher household
incomes (than those with lower household incomes).
On average, inheritances and gifts contribute a larger £ amount to the
wealth of those higher up the wealth distribution. However, as a % of
wealth, transfers are more important for those towards the bottom of
the wealth distribution. This is illustrated in table 1.
Consequently the direct impact of inheritances and gifts is estimated
to be a small, if anything equalising, impact on the distribution of
wealth.
The exact contribution of wealth transfers to the level and distribution of
current wealth depends on a number of assumptions, in particular what rate
of return was received on the inheritance or gift, and whether the rate of
return on other wealth was affected. The sensitivity of the main results to
some of these is illustrated in the report but the main finding, that wealth
transfers have had little impact on the distribution of wealth, is unaffected.
Director:
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Research Director:
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Rowena Crawford, a Senior Research Economist at IFS and the author of the
report said,
“Contrary to popular belief, inheritances appear to have had little impact on
the distribution of wealth among older individuals. Wealthier individuals are
more likely to have received an inheritance, and to have received larger
inheritances, but they also have more of their own wealth and so the
proportionate increase in their wealth from inheritances is actually smaller
than for lower wealth individuals. Inheritances and gifts are becoming more
common though, and these patterns may be different for younger cohorts.”
Table 1: Contribution of transfers to wealth
Mean household
Mean contribution of transfers to
wealth per person
household wealth per person:
£
£
%
Least wealthy
2,700
3,400
124
Decile 2
35,000
8,100
23
Decile 3
73,300
7,900
11
Decile 4
99,300
10,200
10
Decile 5
126,900
12,600
10
Decile 6
158,100
23,800
15
Decile 7
193,900
22,400
12
Decile 8
246,000
26,600
11
Decile 9
338,200
47,200
14
Most wealthy
889,900
83,500
9
Notes: Sample is individuals born between the 1920s and 1950s who have positive net
wealth. The contribution of transfers to net wealth is calculated assuming they accrue
a 3% annual real return from the time they were received. Figures are rounded to the
nearest 100 and nearest percent.
ENDS
Notes to Editors:
1.
For embargoed copies of the report or other queries, contact:
Bonnie Brimstone at IFS: 020 7291 4800 / 07730 667013, bonnie_b@ifs.org.uk
2.
The research was funded by the IFS Retirement Saving Consortium with
additional support from the Economic and Social Research Council through the
Centre for the Microeconomic Analysis of Public Policy at IFS (grant number
RES-544-28-5001). The IFS Retirement Saving Consortium comprises Age UK,
Department for Work and Pensions, Financial Conduct Authority, HM Treasury,
Institute and Faculty of Actuaries, Investment Management Association, Just
Retirement and Money Advice Service.
3.
ELSA was developed by a team of researchers based at the National Centre Social
Research (NatCen), University College London, and the Institute for Fiscal
Studies. The data were collected by NatCen. The funding for ELSA is provided by
the National Institute of Aging in the United States, and a consortium of UK
government departments co-ordinated by the Office for National Statistics.
IFS hosts The ESRC Centre for Microeconomic
Analysis of Public Policy (CPP)
The Institute for Fiscal Studies
Limited by Guarantee,
Registered in England: 954616
7 Ridgmount Street
London
WC1E 7AE