# % of households with €1m+ net wealth has doubled in the last eight years



## Sarenco (8 Nov 2022)

The Evolution of Irish Household Wealth  | Central Bank of Ireland
					

This behind the data publication focuses on the evolution of Irish household wealth inequality since 2013




					www.centralbank.ie
				




Another interesting nugget from the analysis is that the % of total household net wealth owned by the top 10% of Irish households has actually fallen from 60% in 2013 to 54% in 2022.

It's a pity, IMO, that the data isn't broken down into age cohorts.  I suspect the proportion of households headed by somebody in their 60s with net wealth of €1m+ is actually quite significant, whereas I suspect very few households headed by somebody in their 30s have net wealth of €1m+.

Another weakness of the data, IMO, is that it excludes claims on the State in calculating net wealth.  For example, the average Garda would have accrued pension entitlements with an actuarial value well north of €1m by 55 but that doesn't show up in data.


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## marsaday (8 Nov 2022)

So would nett wealth include one’s private residence less mortgage outstanding and one’s accumulated private pension ?


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## Steven Barrett (8 Nov 2022)

I'll have a read of that report later, thanks for sharing it. 

Very interesting on the concentration in wealth. We have seen in the US and to a lesser extent in the UK, the rich getting richer. While there are more millionaires in Ireland, the concentration of wealth is being spread out a bit more. I would have thought we were going more like the US. 


Defined benefit pensions are always a difficult one. We don't include them in the net worth statement for financial planning clients as you never actually own the benefit and can never take the full value in one go. An annuity is a salary. It dies when you die (or your spouse). While there are certainly many public servants who have pensions valued at over €1m, I wonder how many will actually receive over €1m from them?


Steven
www.bluewaterfp.ie


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## Sarenco (8 Nov 2022)

marsaday said:


> So would nett wealth include one’s private residence less mortgage outstanding and one’s accumulated private pension ?


Yes, plus any other financial assets (deposits, shares, etc., held outside your pension), less any other debt (credit card, motor loans, etc.)


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## NoRegretsCoyote (8 Nov 2022)

Sarenco said:


> It's a pity, IMO, that the data isn't broken down into age cohorts. I suspect the proportion of households headed by somebody in their 60s with net wealth of €1m+ is actually quite significant, whereas I suspect very few households headed by somebody in their 30s have net wealth of €1m+.


The CSO does this in the data release, kind of. Unsurprisingly, older people hold the most wealth and only 13% of adults under 35 have net wealth above the median for all adults. But this is the same the world over.


Sarenco said:


> Another weakness of the data, IMO, is that it excludes claims on the State in calculating net wealth. For example, the average Garda would have accrued pension entitlements with an actuarial value well north of €1m by 55 but that doesn't show up in data.


DB schemes (and not just public sector ones) are excluded and also life insurance. The issue is that this is a survey-based, self-report method so you can only ask people obvious things like the value of their pension fund, bank deposits, farmland, etc. Most people have a very hazy idea of their DB benefits never mind being able to put a capital value on them. You get the same issue with wage earnings: Revenue data, the CSO household surveys, and CSO surveys of employers all tell you different things about what average earnings are.

When it comes to wealth at the micro level there are huge issues with people guessing, not knowing, and telling lies to the surveyors. There is a reason that AAM is pseudonymous - people don't like to disclose their income and wealth to anyone!


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## Brendan Burgess (8 Nov 2022)

So if I am  a self-employed 55 year old with a defined contribution pension pot of €1m , I am a millionaire.

But a Garda would show up as having nothing? 

Brendan


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## Hasbeen (8 Nov 2022)

Sarenco said:


> Yes, plus any other financial assets (deposits, shares, etc., held outside your pension), less any other debt (credit card, motor loans, etc.)


Thanks


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## Peanuts20 (8 Nov 2022)

It does remind me of the Celtic Tiger where a lot of people (especially in Dublin) found themselves asset rich but perhaps cash poor on the basis of inflated property prices.


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## Sarenco (8 Nov 2022)

I would guess that if you included the actuarial value of a DB pension as an asset, you would at least double (maybe even triple) the % of households with €1m+ net wealth.

Still, it's another piece of analysis that de-bunks the myth that we are becoming an increasingly unequal society.


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## T McGibney (8 Nov 2022)

Peanuts20 said:


> It does remind me of the Celtic Tiger where a lot of people (especially in Dublin) found themselves asset rich but perhaps cash poor on the basis of inflated property prices.


The problem with most analyses of wealth in Ireland is that you're not wealthy at all if you need to count in that, the paper value of your home. A large number of nominally wealthy people are only a number of months' payslips away from reliance on social welfare of one kind of another.


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## noproblem (8 Nov 2022)

When most people say they own their own home are they wrong? Would it not be better to say they're leasing it from a financial institution.


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## Dublin85 (8 Nov 2022)

Sarenco said:


> The Evolution of Irish Household Wealth  | Central Bank of Ireland
> 
> 
> This behind the data publication focuses on the evolution of Irish household wealth inequality since 2013
> ...


how did you calculate that?


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## Sarenco (8 Nov 2022)

Dublin85 said:


> how did you calculate that?


The analysis is presented by the Central Bank - they’re not my figures.


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## ClubMan (8 Nov 2022)

noproblem said:


> When most people say they own their own home are they wrong? Would it not be better to say they're leasing it from a financial institution.


No, unless they're on a perpetual interest only mortgage.


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## NoRegretsCoyote (8 Nov 2022)

Sarenco said:


> I would guess that if you included the actuarial value of a DB pension as an asset, you would at least double (maybe even triple) the % of households with €1m+ net wealth.


And if you added in contributory state pensions you'd add a few more hundred billion in wealth, and probably reduce the Gini coefficient a bit as well.


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## PebbleBeach2020 (8 Nov 2022)

Sarenco said:


> The Evolution of Irish Household Wealth  | Central Bank of Ireland
> 
> 
> This behind the data publication focuses on the evolution of Irish household wealth inequality since 2013
> ...


If the garda is single and dies, their pension pot per say dies with them. It doesn't go to their estate. And so it's not an asset in the calculations.


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## Purple (9 Nov 2022)

PebbleBeach2020 said:


> If the garda is single and dies, their pension pot per say dies with them. It doesn't go to their estate. And so it's not an asset in the calculations.


But it's not not as asset. If a Garda retires at 55 on a salary of €90k they'll get a pension of lump sum payment of  €135k plus a pension of €45k a year. If they live to 85 that's a total pay out of €1.485 million. How can the capital allocated to those payments that not be counted as wealth?


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## Purple (9 Nov 2022)

noproblem said:


> When most people say they own their own home are they wrong? Would it not be better to say they're leasing it from a financial institution.


Around 25% of households have a mortgage on their main residence.


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## joe sod (9 Nov 2022)

Surely the government or cso must have the figures of how many years on average they pay out pensions for each public servant or their spouse that is retired.
Yes some people might die at 69 and some at 95, it's an easy enough calculation to come up with the average cost of pension to the exchequer for every public servant. Obviously getting access to the raw data would maybe be the restriction. Then that figure would be the real wealth effect of public sector pensions.
Maybe it's the case that they don't want to look into this too much, "ignorance is bliss " approach


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## NoRegretsCoyote (9 Nov 2022)

PebbleBeach2020 said:


> If the garda is single and dies, their pension pot per say dies with them. It doesn't go to their estate. And so it's not an asset in the calculations.


This is true. PS pensions are a wealth of sorts, but you can't transfer or securitise it. It's contingent on the state's ability to pay it, and can't be transferred except if you die and the spouse's pension is paid.

I don't think a PS retireee with a pension of €25k per annum has the same wealth as someone of the same age who has enough to purchase an annuity of €25k. The latter has much more flexibility over what to do with their wealth.

Anyway the statistics are more to show wealth relative positions of people of various ages, locations, etc. It's not supposed to literally capture every euro of wealth.


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## Itchy (9 Nov 2022)

joe sod said:


> Maybe it's the case that they don't want to look into this too much, "ignorance is bliss " approach



Its €3.2bn for 2023. 





__





						Department of Public Expenditure and Reform - Databank - Expenditure
					





					databank.per.gov.ie


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## T McGibney (9 Nov 2022)

It makes no sense to count prospective future earnings as wealth. If we do that, we'll probably conclude that the richest cohort in society is newborn babies, whose collective earnings circa 2060 to 2080 should dwarf ours.


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## Itchy (9 Nov 2022)

Itchy said:


> Its €3.2bn for 2023.
> 
> 
> 
> ...



DPER also publishes the Revised Estimates. For 2022, it shows that the PS pensions bill declined by 1.8% vs. 2021. You could also subtract the additional taxation raised by PS employees to calculate the net cost.


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## Protocol (9 Nov 2022)

If people are interested in the costs/value of PS pensions, this may be helpful:



			https://paycommission.gov.ie/wp-content/uploads/DPER-pensions.pdf


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## NoRegretsCoyote (9 Nov 2022)

T McGibney said:


> It makes no sense to count prospective future earnings as wealth


No one counts earnings as wealth, as you have to work to earn.

A pension is an accrued property right which is not contingent on you working so, yes, it is indeed a form of wealth.


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## Purple (9 Nov 2022)

T McGibney said:


> It makes no sense to count prospective future earnings as wealth. If we do that, we'll probably conclude that the richest cohort in society is newborn babies, whose collective earnings circa 2060 to 2080 should dwarf ours.





NoRegretsCoyote said:


> No one counts earnings as wealth, as you have to work to earn.
> 
> A pension is an accrued property right which is not contingent on you working so, yes, it is indeed a form of wealth.


There's an argument to be made either way. It's not an asset in that it's not something that can be sold etc but it's certainly not nothing.


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## joe sod (9 Nov 2022)

Itchy said:


> Its €3.2bn for 2023.
> 
> 
> 
> ...


But still need more information, what is the average number of years a retired public servant or their spouse draws down this pension. You would need this information to calculate the wealth effect of having such a pension?


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