UK household net worth swells by £11trn
Figures from the Office for National Statistics showed this was the second highest growth since the 2008 financial crisis. Additionally, this was just one percentage point short of the 8.5% upturn seen in the year before the global financial crash.
Land contributed to 40.1% of growth in households’ net worth, which was driven by a 7.3% increase in average house prices. ONS said this rise was likely to have been influenced by the reduction in stamp duty rates.
Insurance, pension and standardised guarantee schemes accounted for 39.7% in net worth growth and has since been revised upwards in the Blue Book for this year, a government record which documents economic activity.
Growth in this area was primarily driven by a rise in the value of defined benefit pension schemes, also known as a final salary pension, a consequence of historically low gilt yields.
Currency and deposits contributed 21.5% of the growth in households’ net worth as people deposited more money into their bank accounts due to increases in savings. According to ONS, household savings reached 25.9% last year, which was the highest level on record.
Hidden financial struggles
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown: “The pandemic made millions of Brits richer, as house prices soared, the value of defined benefit schemes rose, and they saved billions of pounds in savings accounts.
“But while those who were already secure got better off last year, those who were struggling have been left behind.”
Coles said the wealth gap widened “dramatically” last year, particularly for homeowners, those with defined benefit pensions, and those who were able to work from home.
“Our research earlier this year showed millions of people are still struggling, and women, renters and those aged 45-54 are particularly vulnerable,” she added.
Research conducted by the financial services company found 45% of people worried about debt while 54% were concerned that their income would fall.
Nearly two-thirds of people worried about saving for retirement while more than half were nervous about building a savings pot to cover emergencies.
Coles added: “Rising house prices have distorted the overall wealth figures, because while they technically make homeowners richer, only those who are downsizing or remortgaging to free up equity get any benefit.
“For other homeowners it makes life more difficult, because it’s harder to move up the property ladder. And for those trying to buy a place of their own, it makes it incredibly hard to build a big enough deposit.”