Institute of Fiscal Studies report shows Britain is more unequal country when measured by wealth than by income
The full extent of the wealth gap between Britain’s rich and poor has been laid bare by a thinktank report showing that 9% of households have no assets while 5% are worth in excess of £1.2m.
The study by the Institute for Fiscal Studies shows that the UK is a more unequal country when measured by wealth – the value of assets such as housing, pensions and shares – than it is when measured by income.
At one end of the scale, the poorest 1% of households have negative net wealth of more than £16,000 – the result of their debts being higher than the value of any assets they might hold.
At the other end, the top 1% of households have net wealth of more than £2.4m. With seven out of 10 households owning their homes outright or buying them through a mortgage, the IFS analysis found that the wealth of the median household – the one in the middle of the distribution – was £172,000.
The IFS said the Gini coefficient measure of wealth inequality stood at 0.65, with a rating of zero equivalent to a country in which wealth was shared equally and a rating of 1.0 for a country in which all wealth was in the hands of a single person. The Gini coefficient for income stood at 0.40.
The study covered trends in wealth during the four-year period 2006-08 and 2010-12 – a time when a deep recession and a sluggish recovery led to falling house prices. It found that, largely due to changes in pension wealth, younger households were on course to be less asset-rich than their parents.
The IFS said that after stripping out changes in how future pension income was valued, mean pension wealth increased in real terms (ie after adjusting for inflation) by around £13,000 for households aged 25-34, £32,000 for households aged 35-44 and £38,000 for households aged 45-54.
“Despite the financial crisis, household wealth on average increased in real terms over the late 2000s, driven by increases in private pension entitlements,” said Dave Innes, a research economist at the IFS and an author of the report. “Even with these increases in average wealth, working-age households are at risk of being less wealthy at each age than those born a decade earlier.”
The IFS said that among households aged 25-34, nearly a quarter (24%) did not expect to receive any income from the state pension in retirement, while nearly half (44%) did not expect to receive any income from a private pension. However, 28% of individuals expected an inheritance to provide them with some retirement resources.
Rowena Crawford, a senior research economist at the IFS and also an author of the report, said: “It is striking how many individuals do not expect private pensions to have a role in financing their retirement, let alone be their main source of income. It will be interesting to see how these attitudes change as auto-enrolment into workplace pensions is rolled out.”
Guardian
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