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Chapter 3: Financial Wealth, 2008/10 This product is designated as National Statistics

Released: 12 July 2012 Download PDF

Key points

  • Total net financial wealth for all private households in Great Britain increased by £54 billion (5.3 per cent) to £1,085 billion between 2006/08 and 2008/10.

  • In 2008/10 nearly a quarter (24.3 per cent) of households had negative net financial wealth.

  • The mean total value of formal financial assets for a household increased from £42,800 in 2006/08 to £46,600 in 2008/10. However, within this the value of some assets such as shares, savings accounts, unit and investment trusts and fixed term bonds fell, reflecting the movements of the stock market over this period.

  • Household net financial wealth increased in most regions. The largest rises were in London and the South West. Slight falls were identified in the North West and East Midlands.

  • Only 13 per cent of individuals who belonged to the highest socio-economic group (large employers and higher managerial) were from households who had negative net financial wealth. This compares with 33 per cent of individuals who were in the ‘never worked or long term unemployed’ socio-economic group.

Introduction

This chapter looks at estimates of household financial wealth from the Wealth and Assets Survey (WAS). Data from the second wave of the survey are presented alongside revised estimates from the first wave1.

Financial Wealth comprises formal financial assets (such as bank accounts, savings, stocks & shares and other recognised savings vehicles), informal financial assets (such as borrowing from family), assets held by children in the household and liabilities (such as formal borrowing, overdrafts & debts). The gross value of financial assets is considered first, followed by the value of debts and other liabilities. These are then combined to produce estimates of net financial wealth (gross assets minus liabilities).

The data presented in this chapter are cross-sectional estimates for wave 1 (July 2006 - June 2008) and wave 2 (July 2008 – June 2010). The wave 1 estimates therefore include some responding households who chose not to take part at the second wave, and the wave 2 results include some households who did not respond in wave 1.

The second wave of the survey commenced shortly after the start of the 2008/09 recession, so some comparisons have been made with various other sources of data to consider whether the estimates from WAS show a similar trend in the value of financial assets to these other sources.  These data can also give some background into the market prior to the recession (See Appendix 1).

Much of the analysis in this chapter is at household level. This means that all assets held by individuals have been added together to produce household totals. In some cases the household totals represent only one account or holding, whereas in others they represent multiple accounts held by one or more than one individual.

Some person level analyses are presented towards the end of the chapter, considering the distribution of individuals by age, education levels, economic activity and NSSec classification across the net financial wealth bands of the household they live in.he measures of financial wealth are based on the personal, private wealth of households. This means that it does not include business assets owned by household members, for instance if they run a business.

One financial asset type, the estimates for which are not included in the estimates of financial and total wealth is Trust Funds (apart from Child Trust Funds) held by individuals within households. This is due to technical problems with recording the data during the survey in both waves 1, and part of wave 2. This omission may have an impact on wealth distributions as trusts tend to be held by wealthier households.

The tables and charts included provide summary results. Each of these is linked to a spreadsheet giving the source data, and often more detailed results. The spreadsheets can be accessed by clicking on the table or chart.

Notes for Introduction

Wealth in Great Britain: Main Results from the Wealth and Assets Survey 2006-08. Published 10 December 2009.  Wave 1 data, 2006/08, published in this report differ slightly from those previously published. The imputation methodology has been enhanced to take into account information gathered at wave 2. This has led to an improvement in the quality of the imputed data at wave 1. See Part 2 Chapter 1 for details.

Financial assets

As stated above, financial assets are classified as either ‘formal financial assets’: recognised products designed for individuals to hold, save or invest their monies; or ‘informal financial assets’: lending or borrowing to or from friends and family.

For most formal financial asset products, having the product would imply a positive financial asset. However, there are some products which, although ‘open’ allow an individual to have little or no money in them, or indeed in the case of current accounts in debit (overdrafts) the product would actually be a financial liability rather than a financial asset.

Formal financial assets

Table 1 shows the proportion of households with different types of financial asset products in both 2006/08 and 2008/10 – i.e. households which had the means of formally holding, saving or investing their money. In 2008/10, an estimated 98.1 per cent of households had some type of formal financial asset product (1.9 per cent of households had no formal financial asset products). This has increased by two percentage points from 96.1 per cent in 2006/08.

The most common asset is the current account with 92.3 per cent of households holding one or more current accounts in 2006/08 and 96.4 in 2008/10. These however, include both current accounts in credit and overdrawn current accounts.

The proportion of households with current accounts in credit increased from 84.8 per cent in 2006/08 to 89.6 per cent in 2008/10 which could suggest that the volume of accounts in overdraft may have fallen. However, as can be seen in Table 9, the proportion of households with accounts in overdraft has changed very little; 17.2 per cent in 2006/08 and 17.4 per cent in 2008/10.

This is a reflection of the fact that these figures may represent multiple accounts within households.

More households may have current accounts in credit (which may be due to taking some accounts from overdraft into credit) but equally the volume of households with accounts in overdraft remains constant (but this could be represented by fewer such accounts in each household). This will be explored in greater detail when analysing the data on a longitudinal level in part 3 of this report.

In general, the proportion of households with each type of formal financial asset product has increased over the period.

Table 1: Proportion of households with formal financial asset products, 2006/08, 2008/10

Great Britain, Percentages

    2006/08 2008/10
All Current accounts1 92.3 96.4
Current accounts in credit 84.8 89.6
Savings accounts 61.8 67.4
ISAs2 42.5 49.4
National Savings certificates and bonds3 23.8 27.4
UK shares 14.9 15.4
Insurance products4 10.5 10.4
Fixed term bonds 8.3 11.8
Employee shares and share options 7.3 7.9
Unit/Investment trusts 5.9 6.4
Overseas shares 1.8 2.1
UK bonds/gilts 1.1 1.1
Overseas bonds/gilts 0.1 0.2
Any formal financial asset1 96.1 98.1

Table notes:

  1. Includes households with either current accounts in credit and/or current accounts in debit.
  2. Individual Savings Accounts. Includes Personal Equity Plans (PEPs). At Wave 1,PEPs were separately identified, but in April 2008, PEPs were regulated as ISAs.
  3. Including Premium Bonds.
  4. Excluding life insurance policies which only pay out in the event of death.
  5. Source: Wealth and Assets Survey, Office for National Statistics

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Table 2 shows the household value of formal financial assets for each type of financial asset identified in the survey.

Overall, the value of all formal financial assets held by households increased over this period with the mean value of such assets being £42,800 in 2006/08 and £46,600 in 2008/10. Half of all households held assets valued at £7,000 or more in 2006/08 compared to £8,100 or more in 2008/10.

Household current account balances are shown for all current accounts and for current accounts in credit only (as at this point we are considering assets rather than liabilities). Overdrafts are included in the calculation of financial liabilities (see Table 9).

The mean value held in all households’ current accounts in credit was £3,000 in both 2006/08 and 2008/10. The median shows that half of all households had £1000 or less in their accounts which were in credit in both 2006/08 and 2008/10.

The proportion of households with one or more savings accounts increased from 61.8 per cent in 2006/08 to 67.4 per cent in 2008/10 (Table 1).

In contrast, the mean value of these savings reduced from £18,900 in 2006/08 to £16,400 in 2008/10 (Table 2).

Table 2: Formal financial assets: summary statistics, 2006/08, 2008/10

Great Britain, £

  Mean Median
2006/08 2008/10 2006/08 2008/10
All Current accounts2          2,500          2,600           800           900
Current accounts in credit          3,000          3,000        1,000        1,000
Savings accounts        18,900        16,400        3,500        3,000
ISAs3        18,900        17,300        7,500        7,000
National Savings certificates and bonds4          6,400          6,500           300           300
UK shares        25,200        22,700        4,000        2,000
Insurance products5        33,600        40,800       15,000       17,000
Fixed term bonds        40,500        38,400       17,000       20,000
Employee shares and share options        32,500        22,500        4,000        3,000
Unit/Investment trusts        41,800        39,700       15,000       13,700
Overseas shares        37,800        22,900        3,000        2,000
UK bonds/gilts        31,600        46,800       15,000       12,000
Overseas bonds/gilts        17,300        57,600        6,000       30,000
Any formal financial asset6        42,800        46,600        7,000        8,100

Table notes:

  1. Results exclude households without each type of asset (zeros).
  2. This represents the net value of all current accounts (i.e. including both current accounts in credit and in overdraft) - only accounts in credit are given in the 'Any formal financial asset' line.
  3. Individual Savings Accounts. Includes Personal Equity Plans (PEPs). At Wave 1,PEPs were separately identified, but in April 2008, PEPs were regulated as ISAs. Therefore in wave 2 they are included as ISAs.
  4. Including Premium Bonds.
  5. Excluding life insurance policies which only pay out in the event of death.
  6. Does not include any financial liabilities (ie current accounts in overdraft).
  7. Source: Wealth and Assets Survey, Office for National Statistics

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At Wave 1, Personal Equity Plans (PEPs) were separately identified in their own right, but in April 2008, PEPs were regulated as ISAs. Therefore in wave 2 they are included as ISAs.

The proportion of households holding either PEPs and/or ISAs in 2006/08 was 42.5 per cent, only a little more than the 41.7 per cent who held ISAs at that time, suggesting that most households who held PEPs also held ISAs.

There was still a large increase in the proportion of households holding PEPs and/or ISAs in 2006/08 and ISAs in 2008/10 (some 49.4 per cent). However, this pattern is not reflected in the value of these assets in the two time periods.

In 2006/08 the mean value of household holdings of PEPs and/or ISAs was £18,000 (with a median value of £7,500) – which compares to a mean value of £17,300 for ISAs in 2008/10 (with a median value of £7,000).

This implies that a number of households have started using ISAs in this time period, however, the amount they have invested is not particularly high (restricted by the amount that can be invested in each financial year).

Table 1 illustrates that the proportion of households owning UK shares or Employee shares and share options increased over the period. However, it is clear from Table 2 that the value of these shares fell over the period for both of these asset types.

The mean value of UK shares by households fell from £25,200 in 2006/08 to £22,700 in 2008/10. The mean value of employee shares and share options fell even more, from £32,500 in 2006/08 to £22,500 in 2008/10. These movements are as expected given the fall in the stock market over this period (see Appendix 1).

There is also some evidence of households investing in overseas assets, with an increase in both the proportion of households owning overseas shares and overseas bonds and gilts and the value of these assets.

As for UK shares, the value of overseas shares have fallen over this period, with the mean value of overseas shares owned by households decreasing from £37,800 in 2006/08 to £22,900 in 2008/10, again reflecting the global downturn of shares at this time.

The mean value of overseas bonds and gilts held by households however, increased considerably from £17,300 in 2006/08 to £57,600 in 2008/10. However these estimates are based on fairly small sample sizes as, for example, only 0.1 to 0.2 per cent of households own overseas bonds and gilts.

Informal financial assets

The survey asked about informal saving and lending for amounts in excess of £250. Informal saving comprises money saved in cash at home, money given to someone to look after or money paid into a savings and loan club.

Table 3 shows the proportion of households who held informal financial assets of some kind. There was little difference in the percentage of households who had some form of informal saving over the period (10.1 per cent in 2006/08 and 9.9 per cent in 2008/10).

However, for those who did hold informal savings, the mean amount saved, whilst still fairly small increased from £1,300 in 2006/08 to £1,600 in 2008/10 – as seen in Table 4.  Half of households with informal savings had less than £700 saved in this way in both 2006/08 and 2008/10.

Table 3: Proportion of households with informal financial assets, 2006/08, 2008/10

Great Britain, Percentages

  2006/08 2008/10
Households with any informal financial assets 10.1 10.0
Amounts saved informally 6.3 5.8
Amounts lent to others informally 4.5 4.6

Table notes:

  1. Excludes small values (less than £250).
  2. Households may have more than one type of asset.

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The proportion of households who lent money to others remained similar in both time periods. However, the amounts lent decreased, from a mean of £9,600 in 2006/08 to £6,800 in 2008/10.

Conversely, the median values increased with half of all these households lending £1,800 or more in 2006/08 but lending £2,000 or more in 2008/10. This implies there were fewer households lending large amounts, but more households lending smaller amounts.

Table 4: Informal financial assets: summary statistics, 2006/08, 2008/10

Great Britain, £

  Mean Median
2006/08 2008/10 2006/08 2008/10
Any informal financial assets       5,100       4,100         700         700
Amounts saved informally       1,300       1,600         500         400
Amounts lent to others informally       9,600       6,800       1,800       2,000

Table notes:

  1. Results exclude households without each type of asset (zeros).
  2. Excludes small values (less than £250).
  3. Source: Wealth and Assets Survey, Office for National Statistics

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The £250 minimum amount adopted by the survey probably means that it underestimated the true proportions of households with informal saving and lending in Great Britain. Previous research has shown that small amounts of informal savings are common in low-income households, and is often the only type of saving that such households engage in. The exclusion of amounts below £250 is also likely to have produced an underestimate of financial wealth at the lower end of the distribution.

Children’s financial assets

The survey also enquired about children’s assets, including the Child Trust Fund (CTF), a long-term tax-free savings and investment account for children. In general , all children born between 1 September 2002 and 2 January 2011 were eligible for a CTF if their parent or guardian received Child Benefit and they lived in the UK.

The Child Benefit claimant (usually the parent) received a voucher worth £250 with which to open an account. There was an additional £250 for children born into low income families eligible for full Child Tax Credit. If the CTF account was not opened by the time the voucher expired (normally 12 months), HM Revenue and Customs would open an account for the child. Once opened, family and friends can deposit up to £1,200 a year into the CTF on behalf of the child.

In 2008/10, 89.4 per cent of children born on or after 1 September 2002 were reported to have had a CTF account  (13.3 per cent of all households reported having one or more CTFs). Given that all children in this category should receive a CTF voucher, this may be a little low.

There are two possible reasons for the low figure: firstly, if the child was less than one year old at the time of the survey, an account may not yet have been opened on their behalf; and secondly, the survey may have underreported children with CTFs if the adult interviewed about a child was unaware that an account had been opened – either by another adult with responsibility for the child or by HM Revenue and Customs.

The survey found that for CTFs, the mean household value in 2006/08 was £500, rising to £700 by 2008/10 (Table 5). Half of all households that had a CTF valued these at £300 or more in 2006/08 and £500 or more in 2008/10. 

Table 5: Child Trust Funds: summary statistics, 2006/08, 2008/10

Great Britain, £

  Mean Median
2006/08 2008/10 2006/08 2008/10
Child Trust Funds 500 700            300            500

Table notes:

  1. Results exclude households without this type of asset (zeros).
  2. Child Trust Funds are for children born since 1 September 2002, so they would have been aged 0 to 8 years at the time of the survey.
  3. Source: Wealth and Assets Survey, Office for National Statistics

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The survey also asked whether all children in the household had any financial assets in their names. In 2008/10, 50.8 per cent of children (under 16 year olds) had other financial assets  (16.5 per cent of all households reported having these assets).

Table 6 shows the value of other children’s assets for households with such assets (which may include more than one child). The mean household value increased from £2,700 in 2006/08 to £3,000 in 2008/10. The median values also increased over the period, with half of households valuing their other children’s assets at £800 or more in 2006/08, but at £1,000 or more by 2008/10.

Table 6: Other children's assets: summary statistics, 2006/08, 2008/10

Great Britain, £

  Mean Median
2006/08 2008/10 2006/08 2008/10
Other children's assets            2,700            3,000               800            1,000

Table notes:

  1. Results exclude households without this type of asset (zeros).
  2. Other children’s assets are for under 16 year olds and exclude Child Trust Funds.
  3. Source: Wealth and Assets Survey, Office for National Statistics

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Endowments

Endowments for the purpose of mortgage repayments are a financial asset and are therefore included here rather than as part of property wealth .  In 2008/10, 5.0 per cent of households had one or more endowments for the purposes of repaying a mortgage, a fall since 2006/08 where 7.0 per cent of households had such endowments (Table 7).

Although fewer households had endowments for the purpose of mortgage repayments, for those who did the estimated mean value of these endowments increased slightly, from £37,500 in 2006/08 to £39,200 in 2008/10.

Table 7: Endowments: summary statistics, 2006/08, 2008/10

Great Britain, £

  Mean Median
2006/08 2008/10 2006/08 2008/10
Endowments          37,500          39,200          28,000          27,500

Table notes:

  1. Results exclude households without this type of asset (zeros).
  2. Endowments for the purpose of mortgage repayments.
  3. Source: Wealth and Assets Survey, Office for National Statistics

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Household gross financial wealth

Gross financial wealth is the sum of: formal financial assets (not including current accounts in overdraft), plus informal financial assets held by adults, plus financial assets held by children plus endowments for the purpose of mortgage repayment.

In 2008/10 97.0 per cent of households had one or more of these forms of financial assets, up 2.1 percentage points from 94.9 per cent in 2006/08.

Between 2006/08 and 2008/10 the mean value of household gross financial wealth increased from £47,800 to £49,200, for those households who had financial wealth.

Half of these households had gross financial wealth of £9,400 or more in 2008/10, up from £8,700 in 2006/08. These patterns were also seen in the mean and median values of gross financial wealth if all households are considered (including those with no positive financial assets).

Table 8: Household gross financial wealth: summary statistics, 2006/08, 2008/10

Great Britain, £

    Mean Median
    2006/08 2008/10 2006/08 2008/10
Households with financial wealth1       47,800       49,200         8,700         9,400
Whole population       45,400       47,700         7,300         8,500

Table notes:

  1. Excludes households without this type of asset or liability (zeros).
  2. Source: Wealth and Assets Survey, Office for National Statistics

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Financial liabilities

This section examines the financial liabilities of households, including non-mortgage borrowing, and arrears on these and/or on other household bills.

Household non-mortgage borrowing

There has been a rise in the proportion of households who have non-mortgage borrowing as seen in Table 8. In 2006/08 48.2 per cent of households had some form of non-mortgage borrowing; this increased to 49.6 per cent in 2008/10.

There were increases in households with personal loans (formal and informal) and loans from student loan companies. The proportion of households with most other forms of non-mortgage borrowing were more stable or decreased between the two time periods.

Table 9: Household non-mortgage borrowing: by type of borrowing, 2006/08, 2008/10

Great Britain, Percentages

    2006/08 2008/10
Formal loans 15.5 18.7
Informal Loans 1.1 1.4
Loans from the Student Loan Company 2.7 3.3
Hire purchase 13.8 13.1
Credit and charge cards 25.5 25.4
Overdrafts 17.2 17.4
Store cards and charge accounts 4.9 4.7
Mail order 9.0 8.3
Any non-mortgage borrowing 48.2 49.2
Excluding overdrafts 44.3 45.8
Excluding loans from the Student Loans Company
47.7 48.4

Table notes:

  1. Includes only households with each type of borrowing.
  2. Source: Wealth and Assets Survey, Office for National Statistics

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Table 9 shows the mean and median values of borrowing for households who have non-mortgage borrowing. There was little difference in the overall the level of borrowing over the time period, with the mean value of non-mortgage borrowing being £7,100 in 2006/08 and £7,300 in 2008/10.

The percentage of households with formal loans increased, however, the mean amount outstanding on the loans fell from £8,600 in 2006/08 to £8,200 in 2008/10. Similarly the percentage of households with loans from a student loan company increased, but the mean amount outstanding on the loan fell from £9,500 to £9,200 over the period.

The percentage of households who had mail order accounts fell from 9.1 per cent in 2006/08 to 8.3 per cent in 2008/10. However, for those households who had mail order accounts in each of the time periods, the mean amount outstanding increased from £400 in 2006/08 to £600 in 2008/10.

In order to obtain a value for non-mortgage borrowing, information is collected on the value of payments and how many payments are outstanding. It was noted at wave 1 that some loans had been reported, but because no payments had yet been made, no value was calculated.

At the second wave of the survey additional questions were asked to establish the value of these new loans. In order to make valid comparisons between 2006/08 and 2008/10 these new loans have been excluded from all estimates presented in this section, but are included in the total household liabilities estimates and have been taken into account when calculating net financial wealth.

If these estimates were included in Table 9, the estimate of non-mortgage borrowing for 2008/10 would increase from £7,300 to £7,600.

Table 10: Distribution of amounts outstanding for household non-mortgage borrowing: by type of borrowing, 2006/08, 2008/10

Great Britain, Percentages

  Mean  Median
2006/08 2008/10 2006/08 2008/10
Formal loans 8,600 8,200 4,500 4,600
Informal Loans 3,900 3,900 1,500 1,300
Loans from the Student Loan Company 9,500 9,200 8,000 8,500
Hire purchase 5,200 4,200 2,600 2,400
Credit and charge cards 3,200 3,400 1,500 1,600
Overdrafts 1,100 1,200 500 500
Store cards and charge accounts 500 400 200 200
Mail order 400 600 100 200
Any non-mortgage borrowing (excluding new loans) 7,100 7,300 2,800 3,200
 Excluding overdrafts 7,300 7,400 3,100 3,500
 Excluding loans from the Student Loans Company 6,600 6,800 2,500 2,900

Table notes:

  1. Includes only households with each type of borrowing.
  2. Source: Wealth and Assets Survey, Office for National Statistics

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Household arrears

In addition to the amounts outstanding on non-mortgage borrowing, some households will be in arrears in relation to these and/or other household bills.

This section examines these arrears (behind by two or more consecutive payments).

Table 10 shows the percentage of households who are in arrears in terms of their fixed-term non-mortgage borrowing. The percentage that fell behind with payments increased from 4.2 per cent in 2006/08, to 4.4 per cent in 2008/10.

The increase is wholly accounted for by households falling behind with payments on personal and cash loans, where the percentage increased from 4.6 per cent in 2006/08 to 5.3 per cent in 2008/10.

The percentage of households who had fallen behind with mail order or hire purchase borrowing decreased; mail order from 4.3 per cent in 2006/08 to 3.9 per cent 2008/10, and hire purchase from 1.9 per cent in 2006/08 to 1.3 percent in 2008/10.

Table 11: Proportion of household arrears: by type of borrowing, 2006/08, 2008/10

Great Britain, Percentages

  Account Holders² All Households
2006/08 2008/10 2006/08 2008/10
Personal and cash loan arrears 4.6 5.3 0.8 1.1
Mail order arrears 4.3 3.9 0.4 0.3
Hire purchase arrears 1.9 1.3 0.3 0.2
Any fixed term non-mortgage borrowing arrears 4.2 4.4 1.3 1.4

Table notes:

  1. Type of borrowing behind by two or more consecutive payments.
  2. Households with this type of borrowing.
  3. Source: Wealth and Assets Survey, Office for National Statistics

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Those with non-mortgage borrowing commitments were also asked a series of questions to enable the total amount outstanding to be calculated. Table 11 shows the mean and median values of arrears for households who are behind with fixed-term non-mortgage borrowing.

For personal and cash loans, the mean household value in arrears decreased from £2,600 in 2006/08 to £1,800 in 2008/10. Half of all households that had missed two or more consecutive payments on a personal or cash loan owed £400 or less, a value consistent both in 2006/08 and 2008/10.

The percentage of those in arrears on non-mortgage borrowing increased over the time period, however the mean amount owed by these households fell from £1,200 in 2006/08 to £1,000 in 2008/10.

Table 12: Distribution of household arrears: by type of borrowing, 2006/08, 2008/10

Great Britain, £

  Mean Median
2006/08 2008/10 2006/08 2008/10
Personal and cash loans 2,600 1,800 400 400
Hire purchase 900 600 200 100
Mail order 300 400 100 200
Any fixed-term non-mortgage borrowing 1,800 1,500 300 300
Household bills 900 800 400 400
Any fixed-term non-mortgage borrowing or household bills 1,200 1,000 400 400

Table notes:

  1. Number of responding households was those with behind by two or more consecutive payments on specified commitment.
  2. Source: Wealth and Assets Survey, Office for National Statistics

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As explained in Chapter 1: Introduction, it can be important to consider both mean and median estimates. The large difference between the mean and median occurs because the mean average was influenced by a small minority of households who, in this case, owed very large sums.

As such, it is particularly appropriate to consider both the mean and median alongside each other when considering the average amounts owed in non-mortgage borrowing, the mean providing the arithmetic average and the median providing a better indication of the typical amounts owed.

Household financial liabilities

Financial liabilities are the sum of arrears on consumer credit and household bills plus personal loans and other non-mortgage borrowing plus informal borrowing plus overdrafts on current accounts.

Table 12 shows the value of household’s financial liabilities. The survey found that the mean household financial liabilities increased from £7,000 in 2006/08 to £7,500 in 2008/10.

Half of all households who had financial liabilities had £2,800 or less in liabilities in 2006/08, which increased to £3,200 in 2008/10.

Table 13: Household financial liabilities, 2006/08, 2008/10

Great Britain

  2006/08 2008/10
% with Mean £ Median £ % with Mean £ Median £
Households with financial liabilities       49.9         7,000         2,800       51.0         7,500         3,200

Table notes:

  1. Excludes households without this type of asset or liability (zeros).
  2. Source: Wealth and Assets Survey, Office for National Statistics

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Household net financial wealth

Net financial wealth is gross financial wealth minus financial liabilities.

Table 14 shows that for households with financial assets or liabilities, the mean net financial wealth increased from £42,700 in 2006/08 to £44,200 in 2008/10. In 2006/08 half of all households had a total net financial wealth £5,700 or less whereas this increased to £6,600 in 2008/10.

Table 14: Household net financial wealth: 2006/08, 2008/10

Great Britain, £

  2006/08 2008/10
%with Mean £ Median £ %with Mean £ Median £
Households with financial assets or liabilities 98.2 42,700 5,700 99.3 44,200 6,600
Whole population 100 41,900 5,200 100 43,900 6,400
   

Table notes:

  1. Excludes households without this type of asset or liability (zeros).
  2. Source: Wealth and Assets Survey, Office for National Statistics

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Table 15 presents the distribution of households by net financial wealth bands. In 2006/08 23.2 per cent of households had negative net financial wealth; by 2008/10, this had increased to 24.3 per cent.

This increase was seen entirely in the lowest wealth band with 9.4 per cent of all households having net financial wealth of less than -£5,000 (minus) in 2006/08 compared to 11.1 per cent in 2008/10. The mean value of net financial wealth for households in the lowest band was -£18,300 (minus) in 2006/08 and -£17,300 (minus) in 2008/10.

Although this implies an improvement, the median values indicate that most had more negative net financial wealth; half of all households in the lowest band had net financial wealth of -£11,300 (minus) in 2006/08 but -£11,800 (minus) in 2008/10.

The difference between the mean and median values is due to a few ‘high negative’ values; the median therefore gives a better measure of what is happening to most households.

The percentage of households in the five upper bands increased in all cases, but the largest increase was seen in the top band of £100,000 or more in net financial wealth. The mean value of net financial wealth for households in the top band was £286,400 in 2006/08 and £277,700 in 2008/10. Half of all households in the top band had net financial wealth of £182,000 in 2006/08 and £179,500 in 2008/10.

The bands have been created to illustrate the distribution of net financial wealth.The breaks were broadly based on the decile points observed in 2008/10, but heavily rounded. The characteristics of individuals living in households with these net financial wealth bands are considered later in the chapter.

Table 15: Household net financial wealth (banded): 2006/08, 2008/10

Great Britain

  2006/08 2008/10
%with Mean £ Median £ %with Mean £ Median £
< -£5,000 9.4 -18,300 -11,300 11.1 -17,300 -11,800
 -£5,000 but < -£500 9.8 -2,200 -1,900 9.7 -2,200 -2,000
 -£500 but < £0 4.0 -200 -200 3.5 -200 -300
£0 but < £500 9.5 200 100 7.3 200 200
£500 but < £5,000 16.6 2,200 2,000 15.4 2,200 2,000
£5,000 but < £12,500 10.9 8,200 8,000 11.7 8,200 8,000
£12,500 but < £25,000 9.5 18,100 17,800 9.6 18,100 17,900
£25,000 but < £50,000 10.6 36,200 35,600 10.8 36,200 35,600
£50,000 but < £100,000 9.1 70,900 68,600 9.4 71,000 69,400
£100,000 10.7 286,400 182,000 11.7 277,700 179,500

Table notes:

  1. All households are included in this table, households who have not reported any financial wealth (less than 1 per cent) have been given zero net financial wealth.

  2. Source: Wealth and Assets Survey, Office for National Statistics

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Aggregate estimates of financial wealth

Table 16 shows the aggregate values for financial wealth for all households in Great Britain (i.e. the weighted sum of each component of financial wealth for every household).Total net financial wealth for the whole of Great Britain increased from £1,031 billion in 2006/08 to £1,085 billion, an increase of 5.3 per cent.

This is almost entirely due to an increase in the total gross financial wealth which increased by 5.7 percent over the period and despite an increase in total financial liabilities of 10.3 per cent, which although large makes little impact on the total net financial wealth.

Table 16: Aggregate estimates of total financial wealth: 2006/08, 2008/10

Great Britain, £ billion

  2006/08 2008/10
Household gross financial wealth aggregate         1,116         1,180
Household financial liabilities aggregate              86              95
Household net financial wealth aggregate         1,031         1,085

Table notes:

  1. Source: Wealth and Assets Survey, Office for National Statistics

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Household net financial wealth by key household characteristics

Figure 17 shows mean household net financial wealth by geographical location of the household-financial wealth by region.

In both time periods, the region with the highest mean net financial wealth was the South East (£65,100 in 2006/08 and £69,400 in 2008/10); the region with the lowest mean net financial wealth was the North East £26,700 in 2006/08 and £27,900 in 2008/10).

As for the whole of Great Britain, most regions showed an increase in household net financial wealth. The exceptions being the North West and the East Midlands where there was a slight decrease, and the West Midlands and the East of England where there was little difference.

The regions that have shown the greatest increase in the mean household net financial wealth are London, the South East, the South West, Scotland and Wales.

Figure 17: Distribution of household net financial wealth: by region, 2006/08, 2008/10

Great Britain, £

Figure 17: Distribution of household net financial wealth: by region, 2006/08, 2008/10

Notes:

  1. Results exclude household with zero net financial wealth.
  2. Source: Wealth and Assets Surveu, Office for National Statistics

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Financial wealth by household type

Figure 18 shows the mean values of household net financial wealth according to the ten categories of household type 1

Figure 18: Distribution of net household financial wealth: by household type, 2006/08, 2008/10

Great Britain, £

Figure 18: Distribution of net household financial wealth: by household type, 2006/08, 2008/10

Notes:

  1. Household financial wealth results exclude household with zero net financial wealth.
  2. SPA is State Pension Age (65 for men and 60 for women)
  3. Source: Wealth and Assets Survey, Office for National Statistics

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The mean value of household net financial wealth increased for most household types, the exceptions being single person households under SPA2 , couples with dependent children and lone parents with non-dependent children where there was a slight decrease in mean household net financial wealth.

Large increases were seen in two household types; ‘couple one under and one over SPA with no children’ and households with ‘2 or more families/other household’ type. Both of these groups would contain individuals who are likely to have been able to generate and retain financial wealth in the prevailing economic climate.

For example, the first group would contain individuals who had perhaps received lump sums on retirement and had invested rather than spent these; the second group would contain households with more adults to accumulate financial wealth than any of the other groups.

Characteristics of individuals by household net financial wealth bands

This section looks at some key characteristics of individuals (adults, over 16) living in households3 with the various net financial wealth bands.

In 2006/08 23.2 per cent of all individuals lived in households with negative net financial wealth; in 2008/10 this figure had risen to 24.6 per cent. The increase was seen entirely in the number of individuals living in households with a net financial wealth of -£5,000 (minus) or less.

The percentage of individuals living in households with a net financial wealth of £100,000 or more also increased from 11.4 per cent in 2006/08 to 12.8 per cent in 2008/10. A similar increase is observed in nearly all net financial wealth bands.

There was a decrease in the number of individuals living in households with net financial wealth greater than or equal to £0 but less than £12,500. In 2006/08 34.8 per cent of individuals were living in such households and in 2008/10 the figure had fallen to 31.5 per cent.

Gender of individuals by household net financial wealth bands

Figure 19 illustrates the distribution of both men and women across the band of household net financial wealth.

Figure 19: Individuals by sex: by household net financial wealth, 2008/10

Great Britain, Percentage

Figure 19: Individuals by sex: by household net financial wealth, 2008/10

Notes:

  1. Source: Wealth and Assets Survey, Office for National Statistics

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Men are more like than women to live in households in the top four net financial wealth bands. Conversely, women are more likely to live in households with total net financial wealth in all other bands apart from the very lowest.

Age of individuals by household net financial wealth bands

Table 20 shows the distribution of individuals living in households with varying degrees of net financial wealth according to their age.

The distribution of individuals living in households of varying net financial wealth differed considerably with age in both time periods. In general, the percentage of individuals living in households with negative net financial wealth fell as age increased.

For example in 2008/10, 37.5 per cent of individuals aged 16-24 were from households with negative net financial wealth compared to only 6.0 per cent of individuals aged 65 or over (in 2006/08 these figures were 37.0 per cent and 5.5 per cent).

The percentage of individuals from households in the lowest net financial wealth band increased in all age groups between 2006/08 and 2008/10. Indeed, the pattern of changes seen in the distribution of all individuals across the net financial wealth bands between the two time periods were generally reflected in all age groups.

Table 20: Age of persons: by household net financial wealth, 2006/08, 2008/10

Great Britain, Percentages

  < -£5,000 -£5,000 but < -£500 -£500 but < £0 £0 but < £500 £500 but < £5,000 £5,000 but < £12,500 £12,500 but < £25,000 £25,000 but < £50,000 £50,000 but < £100,000 £100,000 or more
2006/08 16-24 15.7 15.5 5.8 10.3 17.6 9.2 7.5 7.1 6.1 5.3
25-34 18.3 13.9 4.5 7.9 19.3 11.3 8.1 7.1 5.0 4.7
35-44 13.2 13.1 4.1 7.5 14.5 9.9 9.5 10.7 8.9 8.8
45-54 10.1 8.9 3.3 7.5 12.8 9.3 9.7 12.7 12.1 13.7
55-64 5.4 5.6 2.9 6.9 12.5 9.7 10.1 13.8 13.5 19.6
65+ 1.5 2.3 1.7 9.8 18.3 14.1 12.4 13.3 11.6 15.0
All  10.2 9.4 3.6 8.2 15.8 10.8 9.8 11.0 9.7 11.4
2008/10 16-24 19.1 13.5 4.9 6.8 14.8 8.7 8.4 8.4 6.7 8.6
25-34 20.4 14.4 4.1 5.7 17.6 11.0 8.5 8.1 5.1 5.2
35-44 16.0 12.9 3.3 5.7 14.9 11.0 8.6 10.2 8.3 9.2
45-54 12.6 8.9 3.4 5.4 12.2 10.4 10.4 11.9 10.9 14.1
55-64 7.0 5.7 2.3 5.3 11.1 9.7 9.9 13.8 13.8 21.5
65+ 1.9 3.0 1.1 6.6 15.4 14.9 12.6 14.1 13.1 17.2
All  12.2 9.4 3.0 5.9 14.4 11.2 9.9 11.3 9.9 12.8

Table notes:

  1. Source: Wealth and Assets Survey, Office for National Statistics

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The percentage of individuals living in households with net financial wealth between £0 but less than £5,000 fell between the two time periods for all age groups, there was a general increase in the number of older individuals living in households with a net financial wealth of £50,000 or more.

Education levels of individuals by household net financial wealth bands

Table 21 shows the distribution of individuals living in households with varying degrees of net financial wealth according to their education level.

Table 21: Education level of persons: by household net financial wealth, 2006/08, 2008/10

Great Britain, Percentages

  < -£5,000 -£5,000 but < -£500 -£500 but < £0 £0 but < £500 £500 but < £5,000 £5,000 but < £12,500 £12,500 but < £25,000 £25,000 but < £50,000 £50,000 but < £100,000 £100,000 or more
2006/08 Degree level or above 10.6 5.9 1.2 3.0 11.8 9.7 10.2 12.0 13.6 22.1
Other qualifications 11.6 11.0 3.8 6.8 15.4 10.8 9.7 11.4 9.5 10.0
No Qualifications 6.4 8.6 5.3 16.7 20.9 11.5 9.7 9.3 6.4 5.3
All 10.2 9.4 3.6 8.2 15.8 10.8 9.8 11.0 9.7 11.4
2008/10 Degree level or above 12.3 5.5 1.1 1.7 10.1 10.2 10.7 13.0 13.0 22.5
Other qualifications 14.0 10.9 3.5 5.4 14.3 11.1 9.6 10.7 9.4 11.1
No Qualifications 6.6 9.5 3.9 12.3 19.7 13.0 9.7 11.0 7.5 6.9
All 12.2 9.4 3.0 5.9 14.4 11.2 9.9 11.3 9.9 12.8

Table notes:

  1. Source: Wealth and Assets Survey, Office for National Statistics

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Between 2006/08 and 2008/10 there was an increase in the percentage of individuals from households with negative net financial wealth with either a qualification at ‘degree level or higher’ (17.7 per cent to 18.8 per cent) or ‘other qualifications’ living in households (26.4 per cent to 28.4 per cent). There was little difference in the percentage of individuals with no qualification living in households with negative wealth (20.3 per cent and 20.0 per cent).

The percentage of individuals living in households in the highest net financial wealth increased between 2006/08 and 2008/10, to a greater extent for those with no qualifications (5.3 per cent to 6.9 per cent) than for those with qualifications.

Economic activity of individuals by household net financial wealth bands

The distribution of individuals living in households with varying levels of household net financial wealth differs considerably according to an individuals’ economic activity or employment status group, as can be seen in Table 22.

In 2008/10 28.9 per cent of individuals who were economically active (working or unemployed) were living in households with negative net financial wealth. However, within this group, 48.2 per cent of unemployed individuals, but only 22.8 per cent of self employed individuals and 28.4 per cent of employees were living in such households.

Table 22: Economic Activity of persons: by household net financial wealth, 2006/08, 2008/10

Great Britain, Percentages

  < -£5,000 -£5,000 but < -£500 -£500 but < £0 £0 but < £500 £500 but < £5,000 £5,000 but < £12,500 £12,500 but < £25,000 £25,000 but < £50,000 £50,000 but < £100,000 £100,000 or more
2006/08 Economically Active 13.6 10.4 3.1 5.6 15.1 10.5 10.0 11.3 10.0 10.6
In Employment 13.6 10.0 2.7 5.1 15.2 10.7 10.2 11.5 10.3 10.9
Employee 13.8 10.2 2.8 5.2 15.3 10.8 10.3 11.4 10.1 10.1
Self-employed 12.2 8.1 1.7 3.9 14.2 9.8 9.7 11.9 11.6 16.8
Unemployed 13.4 20.2 12.2 17.0 12.3 6.2 4.6 6.0 4.2 4.0
Economically Inactive 4.6 7.7 4.4 12.7 17.2 11.1 9.5 10.6 9.2 13.1
Student 9.7 13.4 4.8 10.2 19.7 12.4 10.5 6.3 4.7 8.2
Looking after family/home 9.9 17.0 8.4 16.4 17.3 6.6 5.4 5.9 5.1 8.1
Sick/disabled 10.2 17.6 11.2 22.3 15.4 6.4 4.9 5.5 3.5 3.1
Retired 1.4 2.6 1.8 9.5 17.6 13.3 11.6 13.4 11.9 17.0
Other inactive 8.8 11.5 6.0 19.1 13.1 8.2 5.0 8.9 8.0 11.4
All 10.2 9.4 3.6 8.2 15.8 10.8 9.8 11.0 9.7 11.4
2008/10 Economically Active 15.8 10.4 2.7 4.2 13.9 10.9 10.0 11.3 9.4 11.3
In Employment 15.7 9.8 2.2 3.7 14.0 11.2 10.3 11.7 9.7 11.7
Employee 16.0 10.2 2.2 3.8 14.2 11.3 10.3 11.6 9.5 11.0
Self-employed 13.2 7.3 2.4 2.4 13.0 10.6 10.1 12.4 11.7 17.1
Unemployed 18.0 20.4 9.8 13.3 11.4 6.9 5.5 6.1 4.4 4.3
Economically Inactive 5.7 7.8 3.8 9.2 15.6 11.8 9.4 11.2 10.3 15.3
Student 14.7 10.7 6.3 7.4 11.9 8.2 7.5 9.7 7.7 15.9
Looking after family/home 11.3 16.9 7.0 11.5 20.0 7.7 5.4 5.4 5.8 9.1
Sick/disabled 11.9 19.8 11.5 18.5 16.2 6.8 3.9 5.1 3.0 3.2
Retired 2.2 3.0 1.2 6.8 14.7 14.3 11.6 13.9 13.1 19.2
Other inactive 10.7 11.2 5.2 12.3 17.0 5.4 8.5 10.0 6.4 13.5
All 12.2 9.4 3.0 5.9 14.4 11.2 9.9 11.3 9.9 12.8

Table notes:

  1. Source: Wealth and Assets Survey, Office for National Statistics

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In 2008/10 17.3 per cent of individuals who were economically inactive (not working or seeking work) were living in households with negative net financial wealth. However, within this group, 43.2 per cent of those who gave their reason for being inactive4 as being sick or disabled, 35.2 per cent as looking after the family or home and 31.7 per cent of students were living in such households. Conversely only 6.3 per cent of retired inactive individuals live in households with negative net financial wealth.

Socio-economic classification of individuals by household net financial wealth bands

Table 23 shows the distribution of individuals living in households with varying degrees of net financial wealth according to their socio-economic classification5.

Table 23: Socio-economic classification of persons: by household net financial wealth, 2006/08, 2008/10

Great Britain, Percentages

  < -£5,000 -£5,000 but < -£500 -£500 but < £0 £0 but < £500 £500 but < £5,000 £5,000 but < £12,500 £12,500 but < £25,000 £25,000 but < £50,000 £50,000 but < £100,000 £100,000 or more
2006/08 Large employers and higher managerial 8.8 4.7 1.2 1.7 8.1 9.1 9.2 13.9 16.5 26.8
Higher professional 8.9 4.7 0.8 2.0 10.1 9.8 9.8 13.5 15.7 24.6
Lower managerial and professional 10.4 7.0 2.0 3.5 12.5 10.8 10.8 13.2 13.0 16.7
Intermediate occupations 10.7 7.9 2.4 5.3 14.7 11.8 11.1 13.4 10.9 11.8
Small employers and own account workers 10.7 8.2 2.2 6.5 15.7 10.7 9.5 12.1 10.5 14.0
Lower supervisory and technical 11.4 10.6 4.4 8.5 17.5 12.1 10.9 10.7 8.1 5.7
Semi-routine occupations 10.2 12.5 5.4 11.5 19.2 10.7 9.5 9.1 6.5 5.4
Routine occupations 9.6 12.6 5.8 15.8 21.2 10.8 8.3 7.7 4.9 3.4
Never worked/long term unemployed 7.5 14.4 8.4 23.0 19.1 6.8 5.4 5.9 4.1 5.6
All 10.2 9.4 3.6 8.2 15.8 10.8 9.8 11.0 9.7 11.4
2008/10 Large employers and higher managerial 8.4 4.1 0.8 1.6 7.5 8.6 12.2 14.0 15.1 27.7
Higher professional 9.5 4.6 0.6 1.5 7.8 10.5 11.0 14.5 14.7 25.2
Lower managerial and professional 12.5 6.8 1.2 2.6 11.4 11.0 11.0 13.1 12.4 18.1
Intermediate occupations 12.9 8.6 1.9 4.2 13.3 12.3 10.3 12.6 10.9 13.0
Small employers and own account workers 11.8 8.4 3.4 4.4 14.2 11.4 9.3 11.8 10.3 15.0
Lower supervisory and technical 14.0 10.8 2.9 5.6 16.6 12.6 10.9 12.0 8.3 6.4
Semi-routine occupations 12.6 12.6 4.6 9.1 17.7 12.3 8.7 9.5 6.8 6.2
Routine occupations 10.8 13.4 5.7 12.1 20.2 11.6 8.3 7.7 5.7 4.6
Never worked/long term unemployed 11.0 13.5 7.5 17.7 20.4 7.1 4.7 6.3 5.2 6.5
All 12.2 9.4 3.0 5.9 14.4 11.2 9.9 11.3 9.9 12.8

Table notes:

  1. Source: Wealth and Assets Survey, Office for National Statistics

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The distribution of individuals living in households with varying degrees of net financial wealth differs according to an individuals’ socio-economic classification.

In 2008/10 13.3 per cent of individuals who were in the socio-economic group of ‘large employers and higher managerial’ were living in households with negative net financial wealth. This figure increases as we go down the list of socio-economic groups with 32.0 per cent of individuals who had never worked or were long-term unemployed living in such households.

This pattern gradually reverses as household net financial wealth increases. In 2008/10 27.7 per cent of individuals classified as ‘large employers and higher managerial’ were in households with net financial wealth of £100,000 or more, compared to 4.6 per cent of those classified as ‘Routine occupations’ and 6.5 per cent of those who had never worked or were long term unemployed. 

Notes for Household net financial wealth

  1. Household type describes the composition of the household based on the number and age of adults, dependent and non-dependent children.

  2. SPA is State Pension Age (65 for men, 60 for women)

  3. Households who have not reported any financial wealth (less than 1 per cent in 2008/10) are assumed to have zero financial wealth. This section covers individuals in all households.

  4. It should be noted that the categories of economic activity do not represent all persons that could be described as such. For example ‘Students’ would not include any students that did any paid work in the week before interview – only those that said they were not working or seeking work because they were a student.

  5. The questions required to determine the socio-economic group of an individual are asked of all persons aged 16 and above (excluding those still in full time education). There is no upper age limit. The distribution given therefore, is representative of all persons (including the retired). However approximately 3 per cent of those sampled gave insufficient information to determine their socio-economic group and approximately 4 per cent were either individuals who were non-contacts or refusals within an otherwise responding household.

Background notes

  1. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gsi.gov.uk

    The United Kingdom Statistics Authority has designated these statistics as National Statistics, in accordance with the Statistics and Registration Service Act 2007 and signifying compliance with the Code of Practice for Official Statistics.

    Designation can be broadly interpreted to mean that the statistics:

    • meet identified user needs;
    • are well explained and readily accessible;
    • are produced according to sound methods; and
    • are managed impartially and objectively in the public interest.

    Once statistics have been designated as National Statistics it is a statutory requirement that the Code of Practice shall continue to be observed.

Supporting information

Further information

Chapter 1: Introduction, 2008/10 - Introduction chapter to the Part 2 results from the Wealth and Assets Survey incorporating results from the second wave of the survey.
Chapter 2: Total Wealth, 2008/10 - Main results from the Wealth and Assets Survey incorporating results from the second wave of the survey
Chapter 3: Financial Wealth, 2008/10 - Main results from the Wealth and Assets Survey incorporating results from the second wave of the survey.
Chapter 4: Pension Wealth, 2008/10 - Pension Wealth chapter of the Wealth and Assets Survey (Part 2) 2008/10 report
Chapter 5: Annex on Pension Wealth Methodology, 2008/10 - Annex explaining the changes in the financial assumptions for calculating pension wealth between waves 1 and 2.
Wealth in Great Britain Wave 2 - Main results from the Wealth and Assets Survey incorporating results from the second wave of the survey.

Appendix 1

Background note

Levels of household financial wealth can be affected by changes in the value of the financial assets already saved or invested, or by changes in the volume households decide to save or invest. Events in the financial world, such as fluctuations in stock markets and interest rates, affect the value of savings and investments already put in place. Concurrently, these events, along with changes in government policies and the prevailing economic climate, affect the amount of financial resources available to households, as well as households’ saving and spending behaviours. This section briefly examines the potential factors which may have affected the levels of household financial wealth in the years 2006-10.

The time period covered by the WAS (2006/08, 2008/10) coincided with a period of economic turbulence in most parts of the world, including the UK. During 2008-09, the UK experienced a recession which was triggered by a global financial crisis that began in 2007, although the economy did return to positive growth in late 2009 and into 2010. As the crisis intensified, banks became more reluctant to lend to each other, resulting in a shortage of funds which households could borrow. Along with tightening credit conditions, there were several negative consequences from the recession: higher unemployment, a decrease in earnings, and falls in housing equity.

In 2010, unemployment levelled off, although growth in wages continued to slow during this period. UK Government also initiated policies geared towards reducing public spending and sovereign debt from 2010 onwards. The Spending Review introduced public sector pay freezes. National Insurance and Income Tax changes, such as the introduction of the 50 per cent tax rate on incomes above £150,000, could have affected disposable incomes in 2010. These factors can all contribute, either directly or indirectly, to a reduction in households’ financial wealth. If it is assumed that there is no compensatory change in spending behaviours, net financial wealth for households would decrease.

The adverse economic climate was exacerbated by the onset of the sovereign debt crisis in the Eurozone (and Greece in particular), prompting European leaders to set up the European Financial Stability Facility (EFSF) in 2010. This crisis loaded additional uncertainty throughout Europe and financial markets.   

Economic uncertainty is most evidently reflected in the state of the share market. Figure A shows the end-of-month price index of the FTSE100, considered to be the principal indicator of business prosperity. Following falls at the start of the decade, the years between 2003 and 2007 were marked by consistent strengthening in the stock market. As the global financial crisis and the subsequent recession unfolded between 2007 and 2008, the FTSE100 price index fell to a level last seen in 2003. The beginning of 2009 marked a turning point, exhibiting increases in the index. However, this trend appeared to reverse again in early 2010, but recovered to a similar trend exhibited in 2009.  

In response to the global financial crisis and the recession, the Bank of England cut the Base Rate to record low levels (down from a high of 5.75 per cent between July and November 2007, to 0.5 per cent in March 2009). This in turn reduced the interest rates faced by borrowers and savers. Lower interest rates have two effects on household financial wealth. On the one hand, savings do not accrue as much interest as before. On the other hand, lower interest rates on debts may enable people to decrease their financial liabilities more quickly.

Price Index of the FTSE100 between January 2000 and January 2011

UK, Price Index

Price Index of the FTSE100 between January 2000 and January 2011
Source: Office for National Statistics

Notes:

  1. End-of-month price index, not seasonally adjusted

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Although the fall in interest rates since 2007 may discourage people from saving (but help in paying off debts), the UK Government has implemented other measures to encourage households to save, such as increases to the limit of tax-free individual saving accounts (ISAs). By contributing regularly to savings, households are safeguarded against financial shortfalls that are either anticipated (e.g. retirement) or unanticipated (e.g. job loss).

In addition to maintaining the Base Rate at 0.5 per cent, the Bank of England set about a programme of quantitative easing, with the purchase of £200 billion worth of assets between 2009 and 2010. This was geared towards pumping more money into the economy, lowering borrowing costs, stimulating the economy and maintaining the target rate of inflation.

At the same time, the UK Government was keen to stimulate the economy and bring the economy out of recession by encouraging consumer spending. This involved a reduction made to VAT (down from 17.5 per cent to 15 per cent) between December 2008 and January 2010. Inflation increased again in 2010, with VAT reverting back to 17.5 per cent. This policy change, along with fluctuations in food and energy prices and overall inflation rates, influenced household income and expenditure. In turn, the amount (or volume) of savings from disposable income would have been affected.

Comparisons of financial wealth: WAS and household financial wealth indicators

Information on the financial wealth of British households can also be found from two other surveys: the Family Resources Survey (FRS) and the British Household Panel Survey (BHPS). Due to methodological differences, it is not possible to directly compare results from these survey with those from the WAS (for more background information on the FRS and the BHPS, see Technical Notes). Nonetheless, the general patterns in the data from these other sources are considered here, and contrasted with the key findings from the WAS.

Comparison of the distribution of net financial wealth

The distribution of household net financial wealth reported in the WAS is marked by a large positive skew with a large proportion of households with little financial wealth, and a small proportion of households holding the majority of financial wealth. In both 2006/08 and 2008/10, the mean value for net financial wealth for the whole population (£41,900 in 2006/08 and £43,900 in 2008/10) was substantially larger than the median (£5,200 in 2006/08 and £6,400 in 2008/10) (see Table 13).

Evidence of a skewed distribution in financial wealth can also be found in the FRS data for households’ total savings and assets (Table B). In all years from 2006/07 to 2010/11 over half of households reported having less than £3,000 in savings. In 2010/11, almost a third of households reported not having any savings at all, up from 24% in 2006/07.

Table B: Households by Savings, 2007-08 to 2010-11

Percentage of households

  2007-08 2008-09 2009-10 2010-11
No savings 27 28 30 32
Less than £1,500 17 17 16 15
£1,500 but less than £3,000 7 7 7 7
£3,000 but less than £8,000 14 14 14 14
£8,000 but less than £10,000 3 3 3 3
£10,000 but less than £16,000 7 7 7 7
£16,000 but less than £20,000 3 3 3 3
£20,000 or more 21 20 20 19
Sample size (=100%) 24,982 25,092 25,205 25,356

Table notes:

  1. Percentages have been rounded to the nearest 1 per cent.
  2. The percentage of households by savings for 2007/08 have been produced using methodology consistent with years 2008/09 to 2010/11.
  3. The data relating to savings and investments should be treated with caution. Questions relating to investments are a sensitive section of the questionnaire and have the lowest response rate. A high proportion of respondents do not know the interest received on their assets and therefore around one in five cases are imputed (the Methodology chapter of the FRS report outlines the imputation methods undertaken, this can be found at: http://research.dwp.gov.uk/asd/frs/2010_11/chapter9.pdf). It is thought that there is some under reporting of capital by respondents, in terms of both the actual values of the assets and the investment income.
  4. The percentage of households recorded as having no savings, will include those who refused to answer, or did not know the answer, to questions on savings and investments.
  5. The percentage of households recorded as having less than £1,500 in savings, will include those who have a nominal amount in a current account (for example £1), regardless of whether they consider themselves as having any savings.
  6. Source: Family Resources Survey 2007/08 to 2010/11

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The IFS report found that in 2005, the median net financial wealth (savings and investments minus non-mortgage debts) for families was just over £1000. Similar to the later data from the WAS and the FRS, the BHPS data used by the IFS report showed that prior to 2006, there was a similarly large gap between the median and mean, thus reflecting an extreme positive-skew in the net financial wealth distribution. Indeed, according to the IFS report, in 2005, families in the lowest decile of net financial wealth had a net debt of £7,500.

Comparing between 2000 and 2005, the IFS analysis showed that the median net financial wealth increased from £700 to £1,100 during this period. However, there was little change for the bottom quarter of families in the net financial wealth distribution. In fact, the level of debt increased for families in the lowest decile (from £5,400 to £7,600). Much of the increase in net financial wealth was observed for the top half of the distribution.

Similar patterns across the distribution of net financial wealth can be seen in the WAS data on households. Between 2006/08 and 2008/10, the net financial wealth of the top half of the distribution remained constant, while the bottom half of the distribution experienced a fall in their net financial wealth.

TECHNICAL NOTES

1. National Accounts: The Household and NPISH Sector

Both the National Accounts (household sector) and the WAS give an indication of the financial position of households. The main difference between the two is that the National Accounts derive estimates of households’ economic activity from several sources, whereas the latter is a sampling survey. Additionally, there are differences between the two in their coverage, with the household sector account covering all of the UK, whereas the WAS only covers Great Britain.

Perhaps the most important difference between the household sector account and the WAS is the inclusion of NPISH (non-profit institutions serving households) in the household sector account. NPISH are institutions that provide households goods and services without the goal of making profits, and are not predominantly financed by the government or corporations. Examples of NPISH include universities, trade unions, churches, social and sport clubs, charities and aid organisations. The household sector also includes individuals not belonging in conventional households (for example, prisons), and sole-ownership businesses where it is not possible to separate household and business accounts. The WAS samples only private households, and therefore does not include NPISH or sole-ownership businesses. Also excluded from the survey are individuals living in residential institutions, such as nursing homes, university halls of residences, army barracks and prisons.

More details are available on the National Accounts (Blue Book) and the UK Economic Accounts.

2. Family Resources Survey (FRS)

The FRS was launched in 1992 to provide information for the Department of Work and Pensions (DWP). Households surveyed on the FRS are asked questions about their circumstances in the following topics: income and state support receipt, tenure, savings and investments, disability, carers, occupation and employment, and pensions participation.

One of the uses of FRS data by DWP is to model benefit entitlement. Therefore, the data may be presented at the level of the individual, household, or benefit unit. A benefit unit is defined by the DWP as, ‘a single adult or a married or cohabiting couple and any dependent children’. In this way, it is possible for a household to contain more than one benefit unit.

This use of FRS data to model benefit entitlement also determines the detail required in the respondents’ answers in relation to the value of their savings. Respondents are only asked to give an estimate of the amount of their liquid assets if the amount falls between £1,500 and £20,000. This range is wide enough to reflect those benefit units who may be entitled to benefits.

For the years 2006/07 to 2009/10  the FRS, fieldwork period was from April to March. The number of fully co-operating households was approximately 25,000 in each of these years.

More details are available on the FRS

3. British Household Panel Survey (BHPS)

The BHPS collects information from households on a wide range of demographic and socio-economic characteristics. The first wave of the BHPS was conducted in 1991, and included some 5,500 households, equating to approximately 10,300 individuals in Great Britain. Although the BHPS is a longitudinal survey which samples the same individuals on an annual basis, questions concerning wealth and assets were only included every five years beginning in 1995.

As with the FRS, there are several reasons why direct comparisons cannot be made between the IFS analysis (based on BHPS data), and findings from the WAS. First, the financial wealth information from the BHPS pertains to 2000 and 2005, whereas this information on the WAS refers to the period from 2006 to 2009. Second, the BHPS does not ask households about current accounts or cash that is kept at home; information on both of these assets are collected by the WAS. Third, the IFS analysed BHPS data on family unit level, rather than household unit level. In doing so, for example, non-dependent children living with their parents in the same household will be entered as a separate family unit; and by logic, family units would either be the same size as, or smaller than, households units. All of these reasons would likely produce a lower estimate of household/family financial wealth in the BHPS, than in the WAS.

More details are available on the British Household Panel Survey.

References

Berry S and Williams R (2009) ‘Household Saving’, Bank of England Quarterly Bulletin, Vol. 49, No. 3

Browning M and Crossley T F (2001) ‘The life-cycle model of consumption and saving’ Journal of Economic Perspectives, Vol. 15, No. 2

Chamberlin G and Dey-Chowdhury S (2008) ‘Methods Explained: The Household Saving Ratio’, Economic and Labour Market Review, Vol. 2, No. 3 (March)

Crossley T F and O’Dea C (2010) ‘The wealth and saving of UK families on the eve of the crisis’

Davies C, Fender V and Williams B (2010) ‘Recent Developments in the Household Saving Ratio’, Economic and Labour Market Review, Vol. 4, No. 5 (May)

Content from the Office for National Statistics.
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