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Money Principle wealth chat: wealth in the UK

 

A couple of days ago I, for my shame, realised that my knowledge about the wealth situation in the UK still leaves much to be desired. Acting on this is rather important for the Money Principle since it builds on the realisation that there is not much personal in ‘personal finance’.

So today I set out to educate myself. This is what I found.

According to a report of the Office for National Statistics, Wealth in Great Britain: main results from the wealth and assets survey 2006/2008 the average wealth picture by age group looked approximately like this:

 

 

Age Cash Pension Property Total wealth
35-44 35,000 85,000 160,000 280,000
45-54 50,000 190,000 230,000 470,000
55-64 60,000 290,000 270,000 620,000
65-74 40,000 190,000 250,000 480,000
75-84 0 150,000 220,000 370,000

 

What do these numbers tell us? The way I read them, they tell an interesting story, namely that:

  • On average, across the age groups, about 50% of our wealth in the UK is in our houses.
  • In mid-life our pension is about 40% of our wealth.
  • More importantly, the average amount of liquid wealth is the highest for the age group 55-64 and it is still at a very low £60,000 and the very elderly have no cash reserves at all.

I should say that these are rounded numbers and also they are averages, which has its problems. Also these numbers are not telling us, as individuals, about how broke, poor or rich we are; at best they can provide a yardstick for comparison with the average. But they tell a story that sounds about right: that in the UK too much of our wealth (90% and over) is tied up in non-income generating real estate and pensions. This generally makes us ‘assets rich and cash poor’ which in turn restricts our capacity to absorb ‘shocks’.

This report makes an interesting reading. It also tells us that half of the people surveyed reported that they have not saved anything during the previous twelve months and over one third that they have never saved.

Do you know what? I believe it – I did belong to the one third who never saved; or shall we say, I saved and spent so there was usually nothing in my savings account. The realisation that our net worth, although not negligible, has a structural problem – too much wealth in non-income generating real estate, pensions and life insurance but hardly any liquid or income generating wealth – made me set the three financial goals I shared here.

Where do you stand in comparison with the nation?

6 thoughts on “Money Principle wealth chat: wealth in the UK”

  1. It’s a scary thought when you are worth more dead than alive 🙂

    In comparison with the nation, we are just below the average on total wealth – 50% is property wealth, 45% is pension / life assurance and 5% is cash. So yes asset rich and cash poor describes us perfectly. We couldn’t afford to sell our house and buy it back which seems to be a ridiculous position to be in.

    It looks like we will fall below average in our 50s-60s unless we address our savings and boost our pensions. We also need to address our cash situation.

    Great post Maria. Have you seen “Penn’s Parade” ? This is a diagrammatic representation of wealth in the UK. Try Googling it, if not, I think I have a link somewhere.

    Reply
  2. Quite right! I have been looking at our life insurance and wondering one, whether we are over insured and two, whether I am geeting this ‘life thing’ wrong. As I have said before life is to be lived and enjoed not to be survived.

    For the time being keeping the insurance but when wealth building is at certain level I will need to revisit.

    I had a rather big shock with these numbers – will write about this one in a follow up.

    Reply
  3. I am not worth much dead or alive! I took one look at that chart and I AM DOOMED to poverty according to that!! Just as well I am not too bothered about national wealth charts, more interested in getting to a state of having enough for what I want to do, and making that money in the way I want to do it.

    Reply
    • Helen, I would say (or repeat but this only means that it is important) that the absolute amout is not that important; more important is the distribution of wealth – one very clear issue is that we don’t have liquid wealth.

      Reply

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