Property and pension wealth driving inequality, says Resolution Foundation

By agency reporter
June 19, 2017

A new report to be published later this week by the Resolution Foundation says that wealth is a crucial but often forgotten part of the debate on living standards and inequality.

The Foundation notes that since the financial crisis, home ownership among the least wealthy half of the population has fallen by around 12 per cent, while it has continued to rise  by one per cent for the wealthiest 10 per cent. This shift in property wealth towards the richest families means that shifts in property ownership are now driving up overall wealth inequality.

Conor D’Arcy, Policy Analyst at the Resolution Foundation, said, “The accumulation of wealth over the course of our lives is arguably the most important driver of lifetime living standards, and yet it has been largely ignored in the public debate. Given the hugely unequal distribution of wealth across Britain, it’s time we looked into how the nation’s wealth is divided up and what the consequences are for those who never build up assets of any significance."

“While many people assume we live in a country of ever growing wealth inequality, in fact Britain witnessed a significant closing of the wealth gap between rich and poor in the decade or so before the crisis. This is largely due to rising home ownership which enabled many less wealthy families to gain a key asset and benefit from rising property prices."

“However with wealth inequality now rising again, the progress of the pre-crisis period has gone into reverse.  Falling levels of home ownership mean that having once been a great force in driving down inequality, shifts in who owns what property are now fueling the wealth gap between rich and poor, while also creating sharp wealth divides between young and old too."

“At £11.1 trillion and growing, Britain has a lot of wealth to share around. It’s vital that policy makers ensure that the key drivers of wealth in Britain today – property and pensions – are accessible to as many people as possible, young and old.”

The accumulation of wealth over the course of someone’s working life is a key driver of their opportunities and those of their children. And the drawing down on accumulated wealth, for example through accessing private pension savings, is an essential determinant of living standards in retirement. The Foundation says that the distribution of wealth across Britain is therefore a concern for us all.

The report shows that the nation’s record £11.1trillion of wealth is distributed far less equally than earnings or household income. It finds that one in ten adults own around half of the nation’s wealth, while the top one per cent own 14 per cent of Britain’s wealth. Even this figure may be an underestimate given the great difficulties in measuring the wealth of the super-rich. By contrast, 15 per cent of adults have no or negative wealth.

However contrary to the popular perception that wealth inequality has been rising for decades, the report shows that the inequality of net financial and property wealth fell steadily between 1995 and 2005. This fall in inequality was driven by high and rising home ownership, which meant that more households further down the wealth distribution gained a key asset and were able to benefit from the pre-crisis property price boom. The proportion of property wealth owned by the bottom four-fifths of adults grew from 35 per cent in 1995 to 40 per cent in 2005.

However, the Foundation warns that with home ownership steadily falling since its mid-2000s peak, the proportion of property wealth owned by the bottom four-fifths of the population has started to fall again.

The research shows that total wealth across Britain – including private pensions, net property, net financial and physical wealth – continued to rise in the wake of the financial crisis, from £9.9 trillion in 2006-08 to £11.1 trillion in 2012-14. This increase has been driven by rising pension wealth, in particular final salary pensions which have got more valuable as annuity markets have tumbled.

Private pensions account for the largest share of Britain’s total wealth at 40 per cent of total wealth (or £4.5 trillion), followed by net property wealth (35 per cent or £3.9 trillion) and net financial wealth (14 per cent of £1.6 trillion).

*Resolution Foundation http://www.resolutionfoundation.org/

[Ekk/6]

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