The nature of the relationship between lifetime income and saving rates is a longstanding empirical question and one that has been surprisingly difficult to answer. We use a new data set containing both individual survey data on wealth holdings and administrative data on earnings histories to examine this question. We find, for a sample of English households, evidence of a positive relationship between the rate of private wealth accumulation and levels of lifetime earnings. Even when state pension wealth is included, the top quintile of lifetime earnings have significantly higher wealth to lifetime earnings ratios than the other quintiles. Under this broad measure of wealth, those in the middle of the distribution of lifetime earnings accumulate the least wealth relative to their earnings.
Authors
Carl Emmerson
Carl, a Deputy Director, is an editor of the IFS Green Budget, is expert on the UK pension system and sits on the Social Security Advisory Committee.
Gemma Tetlow
Antoine Bozio
Antoine is a Research Fellow, an Associate Professor at the EHESS, and Director of the Institut des Politiques Publiques (IPP) in Paris.
Cormac O'Dea
Cormac is a Research Associate of the IFS, an Assistant Professor of Economics at the Yale University and Research Fellow at the NBER.
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