A tale of three distributions: inheritances, wealth and lifetime income

Document type
Working Paper
Crawford, Rowena; Hood, Andrew
Institute for Fiscal Studies
Date of publication
13 April 2015
IFS Working Paper; W15/14
Poverty Alleviation Welfare Benefits and Financial Inclusion, Older Adults
Social welfare
Material type

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This paper investigates the impact of inheritances and gifts received on the distribution of wealth among older households in England, and the implications for inequality in lifetime incomes. Whereas previous work has looked only at marketable wealth, this research considers broader measures including public and private pensions. Once pension wealth is included, inheritances and gifts no longer have an equalising impact on the distribution of wealth.

Without pension wealth, including transfers takes the wealth share of the top 10% from 40% to 38%; with pension wealth, the impact is near zero. This has important implications for the impact of inheritances and gifts on the distribution of lifetime incomes. Exploiting a link with administrative data on lifetime earnings, this paper shows that savings rates are significantly increasing in lifetime incomes when pension wealth is excluded, but less so when it is included. 

This indicates that the impact of intergenerational transfers on the distribution of lifetime incomes among these individuals is likely to be negligible or inequality-increasing, rather than inequality-reducing.

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