Changes to the estimates of private pension wealth from those previously
published from the Wealth and Assets Survey
Unlike other measures of wealth estimated in the Wealth and Assets Survey (WAS), where respondents are asked to estimate the value of their assets, estimating the value of private pension pots is less straightforward.
When wave 1 data were first being processed, the ONS worked closely with the Institute for Fiscal Studies (IFS) to develop the methodology for the calculation of private pension wealth. The basic methodology has remained unchanged and was explained in detail in Wealth in Great Britain 2008/10, Part 2, Chapter 5: Annex on Pension Wealth Methodology, 2008/10. This current annex reports on changes in some of the assumptions that have been made which have affected the overall estimates.
Following the publication of wave 2 data, where the estimates of pension wealth increased considerably between waves 1 and 2 of the survey, the ONS, in liaison with experts in other government departments, undertook a study to evaluate whether the methodology for calculating private pension wealth could be improved, as the change was thought to be largely unrepresentative of the actual change to pension wealth during this time period. The increase was due primarily to the increase in the modelled estimates of defined benefit pensions, which use some external data: annuity rates and discount factors.
The results of this work made recommendations to change the financial assumptions used, and it was agreed that these changes should be applied to all waves of WAS available to date, so that private pension wealth is calculated on a consistent basis across existing and future waves of the survey.
In addition to the changes to the financial assumptions, the estimates of pension wealth have also changed due to the way in which the selection of individuals eligible for current occupation pensions is carried out; updated imputation of wave 2 data using information collected at wave 3; and the imputation of a small number of non-respondents at wave 1.
The methodology changes were applied to all waves of WAS, so private pension wealth is calculated on a consistent basis across existing and future waves of the survey. Because of this, analysis from wave one and two of the WAS differs from that previously published.
Compared to the previous release of Wave 1 and 2 data, the changes and improvements have resulted in lower estimates of pension wealth but relatively unchanged estimates of membership levels.
Further details are available in the ONS publication Chapter 7: Technical Details, Wealth in Great Britain 2010-12
Email: Stephen Smith
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