New Savings Index reveals huge divergence between Britain’s “haves” and “have nots”

December 5, 2017

TISA, the consumer-focused membership organisation, and KPMG are launching a new biannual Savings Index providing a unique view of the total savings of UK households by region and age. The Savings Index is designed to help encourage long term saving at a time of rising consumer debt.

The first TISA & KPMG Savings Index found:

• Average savings of households in Great Britain (property, pensions and financial assets) are £233,000;
• There is a huge dispersion between those who own a house (£421,000) and those who do not (£4,000);
• Although the North-South divide on property values remains wide, it is narrower on pensions and pensions go further in the less prosperous regions where wages and living costs are lower.

Mind the gap

Today’s savings index uncovers the stark difference between homeowners and non-homeowners. Over the past four years the movement of asset prices has enriched those who own their home, have a pension and/or hold investments. If the current rate of property, bond and equity appreciation were to continue at the rate seen over the last four years, the typical household will have £1 million of savings by 2041.

However non-homeowners tend to hold most assets in deposit accounts which have endured record low interest rates for a decade. This low growth has been exacerbated by a sharp rise in borrowing via credit cards, overdrafts or student loans. The dependency on deposit accounts and debt has worked to further widen the gap between the typical homeowner and non-homeowner.

Pensions: the great leveller

The North-South divide is much less acute for pensions than for house prices – and the pensions go further because wages and living costs are lower in the less prosperous regions. The pension pots of those in the South West, Wales and Scotland will pay for a retirement as comfortable as that enjoyed by those in the more prosperous, but more expensive, South East.

• South West – the average pension is worth 5.1x the average annual wage
• South East – the average pension is worth 5x the average annual wage
• Scotland – the average pension is worth 4.9x the average annual wage
• Wales – the average pension is worth 4.7x the average annual wage
• London – the average pension is worth 3.4x the average annual wage

Adrian Boulding, Director of Retirement at TISA said:

“Too many people are not saving enough, or planning for their financial future. The Savings Index is intended to encourage people to save more. Giving people an opportunity to benchmark their savings against their peers is a great way to provide a much-needed nudge as to how much they should be saving. We hope it will help households set long term goals for themselves, their families and their future financial wellbeing.”

Bill Robinson, Senior Advisor at KPMG has said:

“Rapidly rising house prices and financial markets have boosted the wealth of the affluent. But for those without property, pensions or investments, historically low interest rates have made acquiring wealth a real challenge.”

The Rt. Hon. Nicky Morgan, MP for Loughborough and Chair of the Treasury Select Committee said:

“This Savings Index can play a vital role in helping to set a benchmark on the effects of Government savings policies. I hope that by the time the next Index is published, we’ll be able to see a clear trend in people’s savings habits and that it will help encourage future savings policies.”

The Savings Index will be updated every six months using asset prices and savings flows.

-ENDS-

Contact:

TISA. Issued on behalf of TISA by Atlas Partners, for further information please contact:
Sarah Evans, telephone: 020 7183 7154 or 07523 609413, email sarah.evans@atlas-partners.co.uk oremail: tisa@atlas-partners.co.uk.

KPMG. Christina Bridge, KPMG, telephone: 07789504905 or email Christina.Bridge@KPMG.co.uk

Notes to Editors

About the TISA and KPMG Savings Index:

• The conclusions are based on the official ONS Wealth and Assets Survey (WAS) of 20,000 households, which has been carried out every two years since 2006. The Wealth and Asset Survey enables savings to be broken down by asset class (pensions, housing and financial assets) and provides information on the age and location of each household surveyed.
• The WAS provides an authoritative overview of the stock of savings held by households in Great Britain, but the latest data is for 2012-14. So, KPMG has used data on asset prices and savings flows to update the WAS to mid-2017 savings values. They found that savings growth since that period is mainly due to changes in asset prices, rather than inflows of new savings which only contribute around one per cent per annum to the growth of the stock.
• A key feature of the Savings Index is its “Households like mine” facility, enabling users to compare their current savings with an up-to-date estimate of the typical savings of people of the same age and location. These refined comparisons are important because savings grow over the life cycle and there are large regional difference in house prices.
• There are two common ways of measuring the average household: the mean and the median. Statisticians agree that because of the unequal distribution of wealth across the country, the median household is a better and more accurate measure of “average” than the mean.
• Median figures cannot be added up, which means the total sum of the median property savings, median pension and median financial asset savings is not the same as the media of total savings. The index overcomes that problem by constructing a “typical” saver who has the median level of total savings, divided between financial assets, housing and pensions in the same proportions as the median of each of those assets.
• Regional variations in the real value of pension have been calculated using wages because there are no up to date official measures of regional prices.