Asset accumulation across the life course: a report of research carried out by the National Centre for Social Research on behalf of the International Longevity Centre - UK
This analysis used British Household Panel Survey (BHPS) data from 1995, 2000, 2004 and 2005, which included detailed questions about household finances. Any financial estimates have been adjusted for inflation using the monthly Consumer Price Index data to 2005 levels. Analysis of incomes, assets and debts has been carried out at the household level, using the age of the household reference person to allocate households to different age cohorts. Net household income broadly increased for all age groups between 1995 and 2004 over and above inflation. The income of the ten-year age cohorts aged 45 or younger in 1995 increased between 1995 and 2004. In contrast the income for cohorts aged 50 or over in 1995 remained relatively stable between then and 2004, once CPI has been taken into consideration. Overall, households were less likely to be contributing to a private pension in 2005 than in 1995. For example, 26% of 25-34 year olds contributed to a pension in 1995 compared with 13% of 25-34 year olds in 2005. For younger age cohorts, there was very little change in their mean net household liquid assets between 1995 and 2005. For example, 45-54 year olds had net liquid assets of £20,345 in 1995, and the assets of this group in 2005 (when they were aged 55-64) were £20,571. In contrast, there was some evidence that older cohorts were better off now than their counterparts had been ten years previously. Those aged 55-64 in 1995 had net assets of £30,135 in 1995 and of £39,600 in 2005 (when they were 65-74). All age cohorts increased their mean net illiquid assets over time, and were better off in 2005 than their counterparts had been in 1995. For example, those aged 25-34 in 1995 had mean household illiquid assets of around £9,000 (adjusted to 2005 rates), which had increased to around £95,000 by 2005 when they were aged 35-44. All groups increased the total net mean assets over time. For example, those aged 25-34 in 1995 had total net assets of around £13,000, which had increased to around £103,000 in 2005 when this group was 35-44. Increases were proportionally greater in the younger age groups. Comparing those aged 25-34 and those aged 45-54 in 1995, these groups had mean total net household assets of around £13,000 and £42,000 in 1995 and these had increased to around £103,000 and £158,000 respectively by 2005. Thus, in 1995 the older group had three times the amount of net assets, but only 1.5 times the amount of net assets in 2005. Overall there has been an increase in the proportion of net assets that are illiquid in all groups between 1995 and 2005, particularly among those aged 25-34. In 1995, among those aged 25-34, only 12% of their total net household assets were illiquid, and this increased to 73% among this group by 2005 (when they were 35-44). Comparing the top wealth decile and the mean, there was an overall decrease in inequality between 1995 and 2005. For example, in 1995 the top decile of 45-54 year olds had 4.4 times the mean net assets of all 45-54 year olds, but the equivalent factor for 45-54 year olds in 2005 was 3.3 times.