Asset Accumulation across the Generations

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Today sees the publication of some new research from the ILC-UK called ‘Asset Accumulation across the Life Course’, made possible by the support of Prudential, and Partnership.


 
During the last few years, a lot of time and attention has focused on pension reform. But, as everyone knows, there have also been lots of changes to other kinds of retirement saving and household assets. To provide a detailed picture of these changes, the ILC-UK decided to undertake the Asset Accumulation research. We wanted to understand how the experiences of different cohorts are varying. We also wanted the research to be fairly simple and descriptive so that it could be accessible to a wide audience.
 
Measuring what has happened to non-pension household assets isn’t easy. Over the life course, people pass through different stages. At some points, they hold their assets individually, but other at stages, with a partner. By focusing on changes to household wealth using data from the British Household Panel Survey, we think we are publishing one of the most detailed pictures of how trends in life course asset accumulation are changing.
 
This is pretty ‘big picture’ research, that is potentially relevant to a whole range of different areas of public policy. In the accompanying discussion paper, ‘Asset Accumulation in Focus’, we focus on a few that are particularly relevant. Inevitably, the major change in non-pension household assets has been in housing wealth. By comparing what has happened to younger and older cohorts, it is clear that their experiences of asset accumulation during the life course will be very different. The findings relate to some of the key interests of the ILC-UK: How do we ensure people provide for their retirement income? How should we pay for the costs of an ageing population?
 
We look forward to hearing other people’s thoughts on trends in life course asset accumulation, and what they mean for public policy.
 
James Lloyd

2 thoughts on “Asset Accumulation across the Generations

  1. alex said:

    Two excellent papers that you have produced this week. However, they are complex and unlikely to be required reading among many.Let’s hope the policy makers and financial community do get to read them.

    I was reflecting what the messages meant for someone at my middle age, with a family of three. My house has grown substantially in value over the last ten years, but the youngest will not have left for another ten years. Up until now the increase in wealth has been tax free.

    Your paper points out though that my “gain” is at a price for young people and by extension my children. That is why mortgage companies will noe lend up to six times salary eyc… At some future point, I may seek to insulate the children from that house price inflation by possibly passing on a lump sum if I sell the house in order to fund their purchases.

    What would make me change my behaviour when I am older and join the cohort you describe that will need to adjust for intergenerational solidarity being under threat ? In effect, if I read it right, I should contribute some of my house price gain into partially funding the possibility of needing future health care ? Older cohorts might buy into a risk-pool to insure against the costs of long-term care.

    How about an idea that those of us slightly younger cohorts who have generated this notional “cash” gain on our house might use this “cash” to finance the building of homes that could be lived in now by young families, and then by us when we are older ? Could a private-public sector vehicle be structured to soak up this huge notional “cash” gain that we have all made ? It must be hundreds of billions…

    For example, I might be prepared to release a portion of the equity in my house that could then be used to construct another. What mechanism is there to extract all the value from people’s house price inflation in order to use that gain to good end ?

    Otherwise will I be speaking with my children in 15 years time about avoiding having children of their own because owning a house is beyond them financially ? And my children and others will be blocking access to hospitals to prevent us oldies receiving treatment in an inter-generational conflict….?

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