Wealth and Assets in Scotland 2006 - 2012

Appendix 1

Some limitations of the survey

The measure of net wealth is based on the personal, private wealth of households. It does not include business assets owned by household members, nor does it include rights to state pensions, which people accrue during their working lives and draw on in retirement. As only private households were sampled, people in residential institutions, such as retirement homes, nursing homes, prisons, and barracks or university halls of residence, and also homeless people are excluded from the analysis.

Survey data relies on respondents being honest and accurate in their answers. Where possible, attempts have been made to compare estimates with other sources. Survey data on wealth typically underestimates wealth at the top of the distribution. Estimates have been compared against a variety of sources including other social surveys (e.g. the Family Resources Survey), the Census, HMRC data on ISA holdings and house purchase data from the Land Registry. Outliers exist in WAS data; they reflect the highly skewed nature of WAS data. All outliers were checked for supporting evidence from interviewers. Where appropriate, edits were made to 'correct' outliers. In many cases, interviewer notes supported the validity of outliers and these remain in the WAS datasets. Given the skewed nature of wealth data, and the impact that outliers can have on parametric estimates, this report does not report on any mean values. Mean values, particularly when exploring change across waves, can lead to the reporting of spurious change with the inclusion of extreme outliers. For this reason, all wealth estimates are reported on using the median and/or deciles.

As with most surveys, some values are imputed; WAS was no exception. These imputations are based on techniques that try to match a missing value from a respondent to the closest non-imputed value from other respondents with very similar characteristics to those of the respondent for whom data is missing. For example, a respondent in a sample unit might choose to provide a range for the value of their residence. In such instance the imputed value would reflect the value of similar homes in the area, for which other respondents provided a value.

The survey collates information on some types of wealth such as pension which required complex calculations. The ONS notes that some estimates of the value of wealth held in private pension require modelling which has been done using a method developed by the Institute for Fiscal Studies (IFS). The financial assumptions used in the IFS model changed between waves 1 and 2, and this has had an impact on the results. More detail on this can be found in the pension wealth methodology of the ONS report on Great Britain at: Changes to the estimates of private pension wealth from those previously published from the Wealth and Assets Survey

For pension wealth, the estimates only include the pension rights accumulated to date; for people who are still working, they do not include rights which may be built up between then and when the person retires. Wealth from Defined Benefit (DB) pensions (current, retained and pensions in payment) is calculated using financial assumptions (discount rates and annuity factors) which change over time. Wealth from Defined Contribution (DC) pensions is calculated from the reported value of the fund. More details on this can be found here: Pensions - Concepts and Definitions

Calculation of deciles

When calculating deciles for each wealth type the population is sorted in order of increasing wealth and divided into ten equal groups, ranging from the ten per cent with the least wealth to the ten per cent with the most wealth.

For some wealth types it is unlikely that an exact figure will be available for the household value. For example with property wealth, there will be many households with values rounded to the nearest £10,000. As such, the point at which the population would be split might fall in the middle of a group of households which all have the same value. Where this happens, households are randomised into the deciles on either side to ensure that each decile has approximately ten per cent of the population.

One consequence of this is that analysis of movements between deciles across waves may see households moving from one decile to the other purely due to this process of randomisation. As such, for all wealth types apart from total wealth, wealth bands are used for longitudinal analysis instead of deciles. This ensures that households only move across bands if the value of wealth has increased or decreased in absolute terms. This analysis has not been carried out for pension wealth as it is less susceptible to short-term increases and decreases in value and is more likely to be accumulated over the course of a working life then drawn upon in retirement.

This does not affect total wealth, where the population does indeed split equally into deciles and the results are identical with both methods.

It should also be noted that deciles are calculated for each wealth type independently. Those households in the bottom decile for one wealth type may be in a higher decile for other wealth types and vice versa.

Sample size in 2006/08

A methodological decision at wave one (2006/08) to reduce the burden on respondents resulted in a selection of questions, including components of physical wealth, to be asked only of a subset of households. The ONS notes that this reduced sample was sufficiently large to produce robust results and does not affect the reliability of the wealth distributions at a household level. Estimates for Scotland were computed based on this assumption.

The estimates of aggregate physical wealth for wave 1 are therefore based on responses from 1,599 households (of the 2,833 households), adjusted using a 'rating up factor' of 1.7683 in addition to the standard weighting procedures. Similarly, estimates of total wealth deciles, and the subsequent analysis using these deciles, were also based on this reduced sample. As a result, estimates of wealth by decile may not sum to estimates of total wealth for the population. When interpreting this analysis, overall estimates of wealth for Scotland should be used for the extent of wealth accumulated and analysis of deciles should be used only for the distribution of wealth within the population, e.g. the share of wealth that goes to the top 10 per cent of the population compared to the bottom 10 per cent.

At subsequent waves, all households were asked the full suite of questions on the components of net wealth. Consequentially 2008/10 and 2010/12 estimates of total household and aggregate total wealth are both based upon the full responding sample. Each wave has been weighted appropriately to allow for comparisons to be made across the waves.