SUMMARY: WEALTH OF OLDER PEOPLE IN IRELAND NORTH AND SOUTH. Executive Summary: Wealth of Older People in Ireland North and South

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1 SUMMARY: WEALTH OF OLDER PEOPLE IN IRELAND NORTH AND SOUTH 1

2 Acknowledgements This research forms part of a programme of independent research commissioned by the Office of the First Minister and Deputy First Minister (OFMDFM) to inform the policy development process and consequently the views expressed and conclusions drawn are those of the authors and not necessarily those of OFMDFM. We are also grateful to the Northern Ireland Housing Executive for carrying out special runs on the Northern Ireland House Condition Survey (NIHCS) data and the Department of Finance and Personnel for supplying us with the capital value data. We also wish to acknowledge the assistance of the staff of Irish Social Science Data Archive (ISSDA) at UCD who provided access to the EU SILC, CSO Household Budget Survey and TILDA datasets. Research team Professor Paddy Hillyard, Queen s University Belfast Dr. Demi Patsios, Policy Research Consultant Naomi Feely, Independent Consultant 2 June 2014

3 SUMMARY Fairness is one of the key elements in the debate about building a better society. Distribution of wealth is a major contributor to this fairness. Wealth has an impact on all aspects of life and is an increasing focus of discussions about intergenerational solidarity. However, there is often a lack of evidence to inform such debates. In order to better understand the type of society we live in and the type of society we wish to build in the future it is important to consider data relating to wealth, assets and income. This paper provides a summary of the key findings of a commissioned project An exploratory study of the wealth of older people in Ireland North and South, led by Professor Paddy Hillyard of Queen s University Belfast (Hillyard et al., 2014). The project examined wealth and assets held by those over 50 and those held by those under 50 in both Northern Ireland (NI) and the Republic of Ireland (ROI). This document presents a summary of the main findings from the research. Key FINDINGS In NI the total personal wealth was estimated at just under 100 billion. People aged 50 and under were estimated to have 35% of the total wealth, while people aged 50 and over had 65%. Existing data does not allow for a similar comparison in ROI. Households aged 65+ in NI have a median disposable weekly income of 280 compared to 494 for those aged 25-49, 452 for those aged and 251 for those aged In ROI, households aged 65+ have a median disposable weekly income of 446 compared to 790 for those aged 25-49, 654 for those aged and 418 for those aged In NI, people aged 65+ have the highest rate of home ownership (63%) and the lowest level of outstanding mortgage (3%) of any age group. They also have the highest level of savings ( 4,000 on average) but the lowest level of value of household goods (a median of 525). In ROI, 87% of people over 65 own their house outright and 2% own their house with a mortgage. The average value of savings held by this age group is 5,519. In ROI the total value of owner-occupied housing stock was estimated to be 280 billion, of which 54% was held by those under 50. In NI people over 50 had 42.5 billion (60%) of owner-occupied housing assets while those under 50 had 28.2 billion (40%). 3

4 Data on wealth in Ireland For the purposes of the research, wealth is defined in terms of three main types of asset: Property assets: housing, land and businesses. Income and other financial assets: earnings, occupational and private pensions, deposits and investments. Physical assets: cars, caravans, boats and other consumer items. Hillyard et al. (2014) conducted a scoping exercise to determine what information was available on assets from various sources. The measures which were directly comparable in existing surveys in both jurisdictions were then examined. A selection of data from ten surveys 1 five in NI and five in ROI was used to produce estimates of the assets (and liabilities or debts) of older people. Housing wealth was estimated using administrative data and combined with survey and Census data. Wealth of older people in NI In NI the total personal wealth was estimated at just under 100 billion. Younger households (people aged 50 and under) were estimated to have 35% of the total wealth, while older households (people aged 50 and over) had 65%. People aged 50 and over own 42.5 billion (60%) of housing stock in NI while those under 50 own 28.2 billion (40%). Those aged 50 and over own an additional 7 billion in other property or land. The total disposable income of households with Household Reference Persons (HRPs) over 50 is million (44%) and is million (56%) for households with HRPs under 50. Savings and other financial investments in NI total approximately 1.4 billion, with million (37%) being held by HRPs under 50 and million (63%) being held by those aged 50 and over. Figure 1 (page 5) summarises the wealth of the over 50 age group in NI compared to the under 50 age group. The over 50 group represents 32% of the total population while the under 50 group represents 68% of the total (NISRA, 2012). 1 See Hillyard et al. (2014) for full details of the methodology. 4

5 Figure 1: Assets and Liabilities NI by age Hillyard et al. (2014) 100% OVER 50 UNDER 50 90% 13% 80% 32% 61% 44% 63% 58% 70% 65% 60% 50% 40% 30% 20% 68% 39% 56% 37% 42% 87% 35% 10% 0% POPULATION PROPERTY INCOME SAVINGS & INVESTMENTS TOTAL ASSETS TOTAL LIABILITIES TOTAL WEALTH (ASSETS - LIABILITIES) Figure 2 shows the net median disposable weekly household income broken down into four age groups. Income is lowest among the age group ( 251), increases for the age group ( 494) and age group ( 452) before decreasing for the 65+ age group ( 280). Figure 2: Net median disposable weekly household income by age group in NI Hillyard et al. (2014)

6 Wealth of older people in ROI The population of over 50s in ROI represents 28% of the total, compared to 32% in NI (Central Statistics Office, 2012). The Irish Longitudinal Study on Ageing provides a detailed picture of the wealth and assets of the over 50s age group only. There is no survey data on the housing wealth of the under 50s. It has to be estimated from other data and hence it is not possible to draw the same comparisons in wealth between age groups as had been done for NI. In terms of the wealth of older people in ROI, the total self-reported value of residential property occupied by people over 50 is billion according to TILDA data. According to TILDA 87% of people over 65 in ROI own their house outright and 2% own their house with a mortgage (O Sullivan & Layte, 2011). 15% of people aged in ROI own other property aside from their home, and 6% of the over-65s own other property (TILDA, 2011). The average weekly household disposable income among over-50s in ROI is 767 but about half live on under 400 per week. About one in eight older people have weekly disposable incomes of 1,000 or more while 26% depend on state transfers as their sole source of income. Figure 3 shows average disposable household income in ROI. As in NI, the age group have the lowest disposable income of all age groups, followed by those aged 65 and over. Figure 3: Net median disposable household income by age group in ROI Hillyard et al. (2014) Hillyard et al. (2014) using a number of sources estimated the total value of housing stock in ROI at 280 billion. 46% of this stock is held by people aged 50 and over while 54% is held by the under 50s. 6

7 ROI OWNER_OCCUPIED HOUSING ROI OWNER OCCUPIED HOUSING NI OWNER OCCUPIED HOUSING WEALTH IN NI AND ROI NI OWNER OCCUPIED HOUSING ROI OWNER OCCUPIED HOUSING People People over 50 over 60% 50 60% People People under under 50 40% 50 40% People over 50 46% People under 50 54% e over 50 60% VALUE OF HOUSING PER HOUSEHOLD TOTAL WEALTH IN NI: VALUE OF HOUSING PER HOUSEHOLD ROI 165,000 (~ 150,000) NI ROI 165, ,000 (~ 150,000) TOTAL WEALTH IN NI NI ROI 102,000 People over 5 People under 5 People over 50 65% People under 50 35% ROI ROI MEDIAN INCOME BY AGE NI MEDIAN INCOME BY AGE ROI Median household income by age group ROI: PEOPLE OVER 50 NI PENSIONER COUPLES NI SINGLE PENSIONERS NI Median household income b age group AGE AGE AGE AGE AGE AGE % 21% 39% % of people aged 50 and over in ROI are dependent on state transfers (TILDA, 2011). 21% of pensioner couples in NI have no income on top of state benefits (Department for Social Development, 2010). 39% of single pensioners in NI have no income on top of state benefits (Department for Social Development, 2010). 7

8 Discussion A report published by the Institute for Fiscal Studies in the UK in December 2013 argues that generations in the UK born in the 1960s and 1970s are unlikely to be better off than their parents, unless inherited wealth is a factor. When compared with those born a decade earlier, the younger generation has lower take-home income; has saved less of previous take-home income; is less likely to own a home; and will tend to find that state pensions replace a smaller proportion of previous earnings (Institute for Fiscal Studies, 2013). At the same time, younger generations may benefit from the wealth of older generations. For example in England in 2010, one-fifth of grandparents aged 50+ gave money to grandchildren, totalling 647 million (International Longevity Centre, 2013). In ROI in the last ten years, 24% of older households have given financial or material gifts (worth 5,000 or more) to their children (TILDA, 2011). Hillyard et al. (2014) show that the age group has the least assets and wealth as well as the lowest income in both NI and ROI. Wealth and assets appear to have accumulated over the life cycle for the over 50 age group, though disposable income decreases with age after 50, with the 65+ age group having a markedly decreased income. The data suggests that the interaction of finance between and across generations is more complex than a weighing up of which age group has the most. It is important to note that inequalities exist within generations. For example, 26% of people aged 50 and over in ROI are dependent on state transfers (TILDA, 2011), while 21% of pensioner couples and 39% of single pensioners in NI have no income on top of state benefits (Department for Social Development, 2010). This research also highlighted the limitations with existing data. Hillyard et al. (2014) found no data to compare age groups in ROI in terms of wealth, assets, income, savings or debt. A picture of those over 50 is presented from TILDA data, but no comparable data between generations. Policy implications There are several implications for policymakers arising out of the Hillyard et al. (2014) research. While the research shows most of wealth in NI held by those over 50, it is also important to note that the interaction of wealth between generations is complex with financial transfers flowing both ways. In building a more equal society, both within age groups and across different generations there are a number of key issues to consider. 1. Intergenerational solidarity: Governments, both local and central, must consider how they can best combine the resources (skills, time and money) of all age groups and generations to meet society s needs without creating disproportionate demands on any one group. Policy-makers in Ireland, North and South, should prioritise ways to strengthen intergenerational solidarity. The development of a set of principles that informs strategy in this area would be a useful starting point. 8

9 2. Inequalities among older people: There are wealth inequalities and income inequalities which impact upon all age groups in society. It is important that policy initiatives do not treat older people as a completely vulnerable entity or an affluent group but rather acknowledge the income diversity among older people in society today. Policy initiatives should be aimed at tackling the root causes of inequalities to support disadvantaged people, both young and old. 3. Encouraging saving and asset-building: Younger generations may not have the same opportunities to build wealth and assets as the current older generation, nor are free university education or the secure employment opportunities enjoyed by previous generations available to them. Asset-building is created over the life cycle and, as a result, policies in the areas of education, employment, care, housing and community relations are of great importance. Policy-makers must work to produce policy initiatives that support opportunities to build a fairer and more equal society for all generations as opposed to one with growing inequalities. 4. A wealth survey: Information on wealth on the island of Ireland remains limited. The lack of data for Ireland, North and South, makes it impossible to make any judgement on the baby boomers and whether or not they have obtained more than their fair share. An accurate and comprehensive picture of wealth is essential to inform both policy considerations and wider societal discussions. This could be obtained through a longitudinal wealth survey similar to the one now conducted in Great Britain. Conclusion The overall purpose of this research was to examine wealth and income between the generations in order to develop an evidence base to inform discussions and future policy considerations. However, debates which pit one generation against another are unhelpful and often disguise underlying issues. Essentially, one must understand wealth and income inequalities within older and younger generations as well as between different age groups. Understanding and addressing these inequalities is the key to building a more equitable society for people of all ages. 9

10 Bibliography Central Statistics Office. (2012). Census 2011: Profile 2 Older and Younger. Dublin: Stationery Office. Department for Social Development. (2010). Pensioners Income Series Bulletin 2008/09. Hillyard, P., Patsios, D., & Feely, N. (2014). An exploratory study of the wealth of older people in Ireland - North and South. Belfast: Centre for Ageing Research and Development in Ireland. Institute for Fiscal Studies. (2013). The Economic Circumstances of Cohorts Born between the 1940s and the 1970s.. London: Institute for Fiscal Studies. International Longevity Centre. (2013). Grandparental Generosity: financial transfers from grandparents to grandchildren. London: International Longevity Centre. NISRA. (2012). Census Population and Household Estimates for Northern Ireland. Belfast: NISRA. TILDA. (2011). Fifty Plus in Ireland 2011: First results from the Irish Longitudinal Study on Ageing. Dublin: TILDA. 10

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