IFS Report Reveals Exaggerated Wealth Gap Between Generations Since 2010

A fresh analysis by the Institute for Fiscal Studies finds that young adults hold a larger share of UK household wealth than official figures indicate. The study emphasises the dominant role of private pensions in national wealth. It also finds that previous official estimates mask important changes since 2010.

How pensions alter the picture

The IFS revalued private pension wealth using a method consistent over time. This approach aligns pension valuations with other asset measures.

Using the revised method, pensions accounted for 54% of total household wealth in 2020–2022. Official statistics had put that share at 38% for the same period.

Age groups and wealth shares

The report shows the 20-to-39 age group increased its share of household wealth during the 2010s. Their share rose from about 10% in 2010–2012 to roughly 18% in 2020–2022.

By contrast, ONS series implied the young adult share remained near 8% across the same years. The IFS says that difference stems largely from pension valuation methods.

Claims about the generational gap

IFS analysis suggests the apparent wealth gap between generations has been exaggerated since 2010. Low interest rates, combined with ONS methods, led to undervaluation of pensions for those further from retirement.

The result has been an overstatement of how much richer older cohorts are relative to younger ones.

Top decile and education differences

The IFS finds the top 10% share of household wealth fell more since 2006–08 than official series show. Their estimate moves from about 45% in 2006–08 to 42% by 2018–2020.

Official figures imply a much smaller decline, from about 46% to 45% over the same interval. The IFS also reports wider wealth gaps by education.

Graduates are more likely to hold private pension wealth. That wealth was especially understated under the ONS approach. Adjusting for this widens observed differences by educational attainment.

Responses and next steps

An Office for National Statistics spokesperson said the latest pension figures follow recommendations from an independent Government Actuary’s Department review. They warned that the improved methods mean that direct comparisons over time are not yet possible.

The ONS said GAD will soon publish the data needed to build a comparable historical series. The agency intends to make back-series comparisons possible once those data appear.

Laurence O’Brien, senior research economist at the IFS, stressed the importance of consistent data for policy. He argued that resolving methodological inconsistencies changes the story on wealth distribution.

• IFS estimate: pensions were 54% of household wealth in 2020–2022.
• ONS estimate: pensions were 38% of household wealth in 2020–2022.
• Young adults (20–39) held about 10% in 2010–2012 and 18% in 2020–2022, per IFS.
• Top 10% share fell from ~45% (2006–08) to ~42% (2018–2020), per IFS.

Filmogaz.com will follow developments as GAD publishes the necessary back-series data. Clearer historical series should improve the analysis of wealth inequality.