Where is Britain’s wealth?

Prudential today reveals the full extent of the changing nature of Britain’s wealth. The study undertaken by Datamonitor into the composition of Britain’s individual wealth highlights the growing shift in wealth away from traditional financial assets towards an increasing importance of non-financial assets (primarily property). If the existing trends continue, non-financial assets could account for 60% of Britain’s wealth by 2009.

It’s all in the home

1996 was the highpoint for financial assets, when 58 per cent of UK household wealth was made up of financial assets, such as life assurances, pension funds, shares and savings - by comparison non-financial assets, primarily property, only made up 42% - however there has been a significant change and today, 55 per cent of Britain’s wealth is tied up in non-financial assets.

Since 2001 the value of non-financial assets has grown by 12.8 per cent, compared to a growth of only 1.3 per cent in financial assets. If these growth rates continue, the balance could shift so that by 2009 non-financial assets would represent 60 per cent of total assets.

Equity held in homes

The Datamonitor report reveals the estimated amount of equity held in Britain’s homes and shows that it varies significantly across the different regions. People in the South East on average hold £210,077 in equity, followed by homeowners in the East (£183,805) and London (£169,477). The North East, North West and Scotland are the regions with the smallest amount of equity held.

Despite the fact that the value of homes is significantly higher in the South of England compared to the North, a look at the amount of equity held in homes across different regions, shows that there is a new trend emerging. The North East, Wales and Scotland have seen the highest percentage increases in the amount of equity held in the home from 2004-2006.

Interestingly, if these trends are projected forward then Wales would witness a 30% increase by 2011 with the average amount of equity in the home extrapolated to £440,057 – these figures perhaps reveal more tellingly that the current rise in the value of homes is likely to be unsustainable as opposed to highlighting ‘property wealth hotspots’.

Ali Crossley, Director for Lifetime Mortgages at Prudential, comments: “It is interesting to see how important property has become in constituting our main source of financial wealth. House prices have risen significantly over the last 20 years and this is one of the reasons why we have seen such a shift in wealth components. But while we have seen a significantly higher increase in house prices in the South of England compared to the rest of the country, our report shows that the Northern regions are by far not the worst off.

“This is good news for people who are considering using their property as part of their retirement planning portfolio, especially for those who will need to supplement their state and work pension. The equity tied up in their homes could prove crucial in boosting their funds, and allowing them to live the retirement they desire.

Savings – will women be the super-savers of the future?

Nonetheless the UK still has savers and the average person in the UK holds £14,103 in savings (excluding equity-related savings). But there is a noticeable contrast between the average value of savings held by men and women: men hold savings of £16,168 but women only having £12,038 – £4,000 less than men.

However, it can be seen that between 2003-2006, the value of savings (excluding equity related) held by women grew at a faster rate than those held by men. Female savings were growing at an average of 9.3% per year, compared to male savings at a rate of 7.7%.

Furthermore the study reveals that it pays to be a couple when it comes to saving: where there are two or more adults living in the same house it is consistently more likely that they will hold an ISA, stocks and shares or premium bonds.

Ali Crossley, Director for Lifetime Mortgages at Prudential, continues: “Looking at the changing face of British wealth it is apparent that we haven’t given up on saving and women in particular are taking their financial future in their own hands more than ever.”