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News: UK wealth built with 'bricks and mortar'

Thu, 26 Jul 07

Britain’s savers have £820bn locked away, and our homes are valued at a staggering £4.3 trillion... 

Together this makes up £5.1 trillion - dwarfing the debt mountain of £1.3 trillion that we hear so much about.  If you add in pensions and other assets such as property investments, these boost the assets side of the balance sheet by a further £1.8 trillion.

So whilst total assets outweigh total debt, Alliance & Leicester’s survey shows that this personal wealth is far from evenly spread across the country, within different regions and age groups having very different proportions.  And the signs are that these divisions are likely to increase further.

More than half of the nation’s net assets* (51%) are owned by people living south of Watford yet they account for only 39% of households.  Between them, those living in London, the South East and the South West of England own a massive £2 trillion. This isn’t just the effect of high house prices – since they account for a disproportionately high share (46%) of the entire nation’s savings too.

Big regional differences

The Scots and Welsh between them own just a tenth (10.6%) of national assets, despite comprising a seventh of all households (14.2%) between them.   This, despite the fact that the Scots have amongst the highest levels of savings.

Far bigger than any regional differences however is the difference that age makes.  Two thirds of the nation’s personal wealth (62%) is in the hands of the over 55s – whilst the under 35s own less than a tenth (9%).  (35% are over 55 whilst 30% are under 35.)

Getting onto the housing ladder makes a big difference to a household’s assets too.  Britons have over £3 in housing equity for each £1 in savings.  So the 31% who don’t own a home are clearly far behind in net asset terms than those who do own one.

But savings show a massive gulf too – with the poorest half the population averaging just £317 in savings (just about enough to replace their washing machine) – whilst the richest half average over £62,283 – or 99% of total savings.

The savings divide

People in London and the South East together with the Scots have the highest levels of savings.  The richest half in these regions have saved 2.8 times as much as the richest half in the South West and the North of England. 

But in all areas of the country the poorest half has only a tiny fraction of the savings of the wealthiest.  The cash poor in the West Midlands have the lowest average savings, £186 – a fifth of the level of the poorest Londoners.

 

Across Britain 29% of households have no savings whatsoever while a further 42% have between £1 and £10,000.  The average household savings are £31,300.  With 71% of households having less than £10,000, the richest 29% clearly have the lion’s share. 

Ewan Edwards, Head of Savings & Investments at Alliance & Leicester comments, “Britons are increasingly losing the savings habit.  On average we are saving just 2.1% of our disposable income – compared to 6% on average over the last ten years, itself low by historic standards.  This despite the fact that wages have risen faster than inflation including housing costs.  Yet having a savings pot put by can make all the difference to quality of life and the choices open to us.”

Older, wiser – and richer

This picture of a divided Britain becomes even starker when we look at the distribution of savings by age.  People in their early 20s have saved on average less than £10,000 (£9,125).  The savviest half having saved an average of £17,746 – nearly double the average for the group as a whole.  Savings dip in the early 30s when people are buying their first homes.

By the late 30s, the average savings level is on the rise once more.  The average level of savings for those between 45 and 54 is £26,504 – with the wealthiest half averaging £52,665 – nearly double the average.

But it’s not until the after the mid 50s that savings start to reach the national average level of £31,000.  After this life stage, the ‘haves’ race ahead.  Once people turn 60, the wealthiest half have average savings of £206,020 – more than £150,000 or four times more than the average for their age group. 

But the starkest contrast of all is between the richest half and the poorest half.  Whilst the well heeled half have over £200,000 on average – the poorest half have less than £2,000.   

 

Edwards continues: “Savings inequality grows and grows as we get older.  Those able to start young, are likely to continue to grow their savings pot to very comfortable levels, while those who do not are likely to increasingly fall behind. 

“Amongst the over 60s, the difference between the ‘haves’ and ‘have nots’ is really stark.  Half of the over 60s have accumulated on average more than £200,000 in savings and investments to help them enjoy a comfortable retirement.  The other half on average have less than £2,000.  As longevity continues to rise, it is far more important to build savings into our financial planning.”

Homeownership

Homeownership adds to the differences in wealth.  The average equity in the family home averages £183,348 across all age groups, with 69% owning their own homes.  Housing equity among homeowners rises sharply in the late 40s as mortgages are paid down. 

And of course the tide of house price rises has lifted homeowners’ assets to unprecedented levels.  Older groups have been the chief beneficiary of that trend. 

Average equity in the homes of different age groups

18 - 24

25 - 29

30 - 34

35 - 44

45 - 54

55 - 59

60 - 64

65 +

Equity

£121,028

£88,111

£114,546

£140,704

£183,981

£264,399

£271,901

£262,133

% who are  home

owners

14%

44%

63%

66%

76%

78%

84%

84%

Edwards concludes: “If the levels of savings young people are making continue to fall then we can expect pensioners in 20 years’ time to have smaller nest eggs and for the gap between rich and poor to widen. Furthermore, levels of homeownership have also now started to fall so more pensioners will be living in rented accommodation in future too.  Housing and savings wealth will be increasingly concentrated into fewer hands.” 

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