Operational review - distribution of personal wealth

Paul Miller, Jon Aldous, Alistair Morton and David Reid, HM Revenue & Customs

[Project number 20102]

LS data on deaths between 1981 and 1985 by sex, age, 1981 tenure and marital status are currently used in the HMRC Wealth Model to adjust mortality rates for 'wealthier' individuals. The adjustment is based on the ratio of the mortality rate of individuals living in owner occupied accommodation to the mortality rate of the population as a whole. The wealth model is used to produce National Statistics on the Distribution of Personal Wealth as published on the HMRC Web Site.

HMRC are conducting an Operational Review of the Wealth Model used to produce estimates of the Distribution of Personal Wealth. This includes a review of the methodology underlying the model. Broadly, the model employs an Estates Multiplier methodology taking deaths within a year and assuming that they are a representative sample of the living. The data used in the model is Inheritance Tax (IHT) data and Probate data. Additions and adjustments are made to account for individuals who are not within IHT or Probate.

A major assumption, which has a large impact of the model, is that mortality rates differ with wealth as well as sex, age, marital status and country. No data are available on the link between mortality and wealth and so it is not possible to derive adjustments directly and a proxy has been used instead. Individuals in the data with wealth over £25,000 are assumed to have mortality rates similar to those individuals living in owner occupied accommodation.

As well as assessing the impact of changes to the differential mortality rates over time we would also like to test the impact of using a different proxy for wealth from the LS, like Social Class (e.g. mortality rates of social classes I and II relative to the whole population.)

The Longitudinal Study contains data on mortality broken down into the subgroups that we are interested in. It is the only continuous study large enough to provide adequate data on mortality within the specified sub-groups - that is. by sex, age, marital status, and housing tenure. It is also the case that other panel surveys tend to have high attrition rates and poorer performance in tracing panel members.

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