Younger adults held a significantly larger share of total household wealth during the 2010s than official statistics suggest, according to analysis from the Institute for Fiscal Studies (IFS), which highlighted longstanding issues in measuring private pension wealth.

The report argued that methodological changes and inconsistencies in Office for National Statistics (ONS) data have made it difficult to accurately assess how wealth is distributed across British households over time, leaving policymakers without a clear and reliable picture.

Private pensions, the largest component of household wealth, have been particularly affected, with the IFS developing a revised methodology that aligns pension valuation more closely with the way other assets are measured.

Using this approach, pensions accounted for 54 per cent of total household wealth in 2020-22, compared to just 38 per cent under official estimates, reflecting a more accurate treatment of future pension income, particularly during a period of ultra-low interest rates.

The revised figures suggested that younger individuals were considerably better off than previously thought, as the share of total wealth held by those aged 20-39 increased from 10 per cent in 2010-12 to 18 per cent in 2020-22 under the IFS methodology.

This compares with official statistics, which showed a much smaller rise, from 8 per cent to 11 per cent, meaning that the gap in wealth between younger and older generations has likely been overstated in recent years.

The analysis also indicated that wealth inequality has fallen more than previously believed, with the share of wealth held by the top 10 per cent declining from 45 per cent in 2006-08 to 42 per cent in 2018-20, compared to a more modest reduction from 46 per cent to 45 per cent under official figures.

However, the IFS noted that while proportional changes appeared limited, significant absolute differences in wealth remained.

In addition, the report found that disparities in wealth by education level were wider than suggested by official data, as individuals with degrees were more likely to hold pension wealth that had previously been undervalued.

As a result, median wealth for graduates was around 50 per cent higher under the revised methodology, compared to an uplift of less than 25 per cent for those without formal qualifications.

The IFS also pointed out that differences between methodologies were particularly pronounced during periods of very low interest rates, although the gap between the two approaches may narrow in future data releases following the rise in market interest rates since 2022.

IFS senior research economist, Laurence O’Brien, stated that "good policy starts with good data."

"Methodological changes and inconsistencies have made it difficult to get a clear picture of wealth inequality in Britain, and how this has changed over time," he said.

“Addressing these issues reveals that the share of wealth held by the top 10 per cent has fallen by more since 2006-08 than suggested by official estimates.

"In addition, young adults held a much higher share of wealth than previously thought, while gaps in wealth between educational groups were wider than official estimates show.”

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