The Effects of the Financial Crisis on Older Adults in England
Lead Research Organisation:
Institute for Fiscal Studies
Department Name: IFS Research Team
Abstract
Abstracts are not currently available in GtR for all funded research. This is normally because the abstract was not required at the time of proposal submission, but may be because it included sensitive information such as personal details.
Publications
Crawford R
(2013)
The effect of the financial crisis on the retirement plans of older workers in England
in Economics Letters
James Banks (Speaker)
(2011)
The effect of the financial crisis on older households in England
Rowena Crawford (Author)
(2012)
The Effect of the Financial Crisis on Older Households in England
| Description | The wide-ranging adverse effects associated with the recent economic and financial crisis provide an unprecedented opportunity for research on broader questions relating to the ways in which people understand, and react to, such shocks. We find that the falls in asset prices associated with the financial crisis lead to substantial falls in household wealth for many older households. Looking over the period covered by the peak to the trough of the FTSE All Share Index (May 2007 to March 2009) our simulations suggest that the median wealth loss among those aged 50 and over was around 8 per cent; with 38 per cent experiencing a loss of more than 10 per cent and 4 per cent seeing a loss of 20 per cent or more. We find that wealth losses are largest - both absolutely and as a fraction of total wealth - among those in the highest quintile of total wealth, and for those with the highest education. Wealth losses are larger (again both absolutely and as a fraction of total wealth) for those still working than for the retired and also in general at lower ages, in part reflecting that a smaller fraction of private pension wealth has been annuitised. These wealth losses seem to have had quite modest effects on the current consumption expenditure of households and to have led to quite modest revisions on expectations of future security and bequests. We find that a £100 wealth loss - which might be considered similar to an annual loss of income of £5 per year - is associated with a fall in spending on the total of food in, food out, clothing and fuel of less than £1 per year. We find an economically small, but statistically significant, negative effect of wealth losses on the mean expected chance of leaving a bequest greater than £150,000, with some evidence that this result is driven by changes to housing wealth among those aged 70 and over. We find no statistically significant evidence that wealth losses lead to individuals reporting a greater chance of having inadequate resources in the future, and we find little evidence that individuals delayed their planned retirement age in response either. Using the same empirical methods, we found little robust evidence of a relationship between the wealth changes caused by the financial crisis and indicators of health and wellbeing including: depression, quality of life and systolic and diastolic blood pressure. However, since it is possible that some health effects take longer to materialise we will use the latest wave of ELSA data (collected between July 2010 and June 2011) to investigate this issue over a longer time horizon. |
| Exploitation Route | Derived datasets containing estimates of state and private pension wealth for each ELSA respondent have been constructed for waves 2, 3 and 4 of ELSA. All these data - along with a methodology paper and a user guide (both of which have been uploaded to the ROS) - have been deposited at the ESRC data archive. The calculations underpinning these estimates were highly technical and the resulting data should be of use to both academic researchers and policy analysts, so we hope these prove to be a well-utilised, and valuable, resource. [Output 1] The paper "The Effect of the Financial Crisis on Older Households in England" has been published as an IFS Working Paper (No 12/09 available at http://www.ifs.org.uk/wps/wp1209.pdf) and has been uploaded to the ROS [Output 2]. The paper "The Effect of the Financial Crisis on the Retirement Plans of Older Workers in England" has been uploaded to the ROS in draft form. This paper will be further revised and will then be published as an IFS Working Paper [Output 3]. The results - at various stages of the research - have been presented at various seminars and conferences. These include an IFS internal seminar; two meetings of the IFS Retirement Saving Consortium (comprising Age UK; Association of British Insurers; Department for Work and Pensions; Financial Services Authority; HM Treasury; Investment Management Association; Money Advice Service; National Association of Pension Funds; Partnership Pensions; and the Pensions Corporation); the ELSA Wave 4 launch in London; a meeting of the Household Finance and Consumption Network at the European Central Bank in Frankfurt; a presentation at a 'Conference on Macroeconomic Policy' held at the Murat Sertel Center for Advanced Economic Studies, Istanbul Bilgi University; and seminar papers given at Trinity College, Dublin and at the Department of Economics, University of Lancaster. Full details of all of these have been uploaded to the ROS. |
| Sectors | Communities and Social Services/Policy,Financial Services, and Management Consultancy,Government, Democracy and Justice,Other |
| Description | A further paper, "The Effect of Wealth on Health: Evidence from the Financial crisis", is being finalised and will soon be deposited at the ESRC. This looks at the impact of wealth changes on potential indicators of health including: depression, quality of life and systolic and diastolic blood pressure. This will also be published as an IFS Working Paper [Output 4]. We will then submit our analysis, in at least two separate papers, to peer-reviewed journals. We will continue to disseminate the findings of this research fully. For example we will submit our work to the forthcoming De Nerderlandsche Bank Annual Research Conference on "Household finances and behaviour in times of crisis" in October 2012. The final key part of our dissemination strategy is to launch the findings for all of the research covered by this project at an IFS conference. We will invite both academic researchers and non-academic users to attend this event. In addition we will issue a press release to publicise the work: this is an effective way to exploit the wide network of IFS contacts to ensure that the work is well publicised, particularly to non-academic users including policy makers. |
| First Year Of Impact | 2012 |
| Sector | Communities and Social Services/Policy,Financial Services, and Management Consultancy,Government, Democracy and Justice |
| Impact Types | Societal,Economic,Policy & public services |
| Description | Economic changes and fluctuations in ELSA |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Other academic audiences (collaborators, peers etc.) |
| Results and Impact | Presentation at ELSA wave 4 launch event This was a presentation to academics from many disciplnes, as well as policymakers and practitioners. |
| Year(s) Of Engagement Activity | 2010 |
| Description | The effect of the financial crisis on older households in England |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Professional Practitioners |
| Results and Impact | Invited talk at meeting of the Household Finance and Consumption Network at European Central Bank |
| Year(s) Of Engagement Activity | 2012 |
| Description | The effect of the financial crisis on older households in England |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Policymakers/politicians |
| Results and Impact | Presentation at a seminar on wealth measurement held at the European Commission, describing our work on the effect of the financial crisis on older adults in England, which involved both the measurement and simulation of wealth holdings and wealth shocks. |
| Year(s) Of Engagement Activity | 2013 |
| Description | The effect of the financial crisis on older households in England |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Professional Practitioners |
| Results and Impact | Discussion of on going work with individuals from civil service, industry and third sector Section not completed |
| Year(s) Of Engagement Activity | 2010 |
| Description | The effect of the financial crisis on older households in England |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Professional Practitioners |
| Results and Impact | Discussion of on going work with individuals from civil service, industry and third sector Section not completed |
| Year(s) Of Engagement Activity | 2011 |
| Description | The effect of the financial crisis on older people in England |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Other academic audiences (collaborators, peers etc.) |
| Results and Impact | Seminar presentation Seminar presentation to colleagues and other academics. |
| Year(s) Of Engagement Activity | 2013 |
| Description | The effect the (1998) financial crisis on older households in England |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Other academic audiences (collaborators, peers etc.) |
| Results and Impact | Seminar presentation This was a presentation to colleagues and academics about the methodology behind the policy analysis |
| Year(s) Of Engagement Activity | 2013 |
| Description | Understanding local police spending |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Other audiences |
| Results and Impact | This presentation was given at the Public Economics UK (PEUK) conference 2016 in Pembroke College, Oxford on 8th September, by Richard Disney, IFS Research Fellow |
| Year(s) Of Engagement Activity | 2016 |
| URL | http://www.ifs.org.uk/uploads/Presentations/Richard%20Disney%20presentation.pdf |