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Markets and Insights

Kleinwort Hambros Wealth Report

An analysis of wealth in Great Britain

Executive Summary

Key findings from the research are:

  • Overall Wealth in the Great Britain has grown by 4.5% a year since the Global Financial Crisis; from £8.5 trillion to £11.5 trillion
  • The top decile of wealthiest people in the Great Britain have at least £1.1 million in assets. This is split as follows:
    - £480,000 in pension wealth;
    - £346,000 in net property wealth;
    - £217,000 in financial wealth; and
    - £58,000 in physical assets.
  • Although popular fiction suggests much wealth is inherited, data shows the largest proportion of wealth is in pension assets, a function of prudent saving and wise investing.
  • Pensions tend to be invested in financial assets such as equities, which have had stellar performance since the global financial crash (2008). Real assets such as property did not grow nearly as fast.
  • Although, not an asset typically associated with the wealthy, ISAs have seen the biggest increase in percentage points and are also by far the most popular financial asset.
  • Studies of wealth in the UK predominately focus on London and the South East. Other regions such as Yorkshire, Cheshire, Edinburgh, Cambridgeshire and Berkshire, have seen a greater level of prosperity since the Global Financial Crisis.

Aggregate Wealth

  • Overall wealth in Great Britain has grown by 4.5% a year since the Global Financial Crisis; from £8.5 trillion to £11.5 trillion.
  • Aggregate wealth is defined as the sum of the following four:
    • Financial (Stock and Shares, etc.)
    • Physical (art, cars, etc.)
    • Net Property (net of mortgage)
    • Pension Wealth

Aggregate Wealth in Great Britain, in £ billion

Aggregate Wealth in Great Britain, by type of wealth in £ billion

Where do the wealthiest people in GB have their money?

  • If you have aggregate wealth of £1.1 million or more, you are in the top decile of wealthiest people in Great Britain. A typical household in the top decile shows the following split:
    • £480k in pension wealth (occupational defined benefit and defined contribution schemes, the value of retained rights in those pensions schemes, any personal pensions).
    • £346k in net property wealth (property values less mortgages)
    • £217k in financial wealth (current accounts, savings accounts, ISAs, overseas and UK shares and bonds).
    • £58k in physical assets (all household goods and collectables as well as the value of all cars and other vehicles in a household).
  • Key Finding: Most wealth is created by putting away money each year throughout your working life, sensibly investing it and letting the power of compounding do the rest. 

2016* - Top decile wealth in Great Britain (£1.1 million) – split of wealth

The Power of Compounding

  • The reinvestments of dividends makes a considerable difference in wealth over the long-term. For example, an investment of £10k invested in 1985 in the FTSE All-Share Index is worth £58k today (dividends not reinvested); had  dividends been reinvested, it would be worth £184k.
  • Starting to invest in a pension early is a game-changer. For example, a 10-year difference in starting age of pension savings at £10k a year given an hypothetical growth rate of 5% a year leads to an almost £571k valuation difference at a retirement age of 65.

£10,000 Invested in FTSE All-Share

£10,000 Invested annually at a 5% growth rate per year

Asset Classes among the top deciles

  • Although, not an asset typically associated with the wealthy, ISAs have seen the biggest increase in percentage points and are also by far the most popular financial asset.
  • The share of households in the top wealth decile holding ISAs has increased from 78% in 2008 to 87% in 2014.

Households owning selected asset classes among top decile, 2008-2014

Aggregate Wealth

  • Over three-quarters of all wealth in Great Britain is held in either pensions or property.
    • The strongest growth has been in pensions, now the biggest form of wealth representing over 40% of the total wealth (around £4.6 trillion). This is understandable because financial assets such as equities have had stellar performance since the global financial crash. Since 2009, the FTSE 100 Total
    • Return (Dividends reinvested) has averaged around 10.6% a year.
    • Property is second, at 36%, but property wealth across the UK grew at around 3% a year, not nearly as fast as financial wealth.
    • The only place in the country where this is not true is in London, where significantly more wealth is held in property assets than in pensions (£775 billion vs. £520 billion).

Aggregate Wealth in Great Britain, by type of wealth, in % (as share of total wealth)

Rebased performance since 2008 of Equities, Property and Aggregate Household Wealth

Breakdown of Total household wealth by region

  • Wealth for the richest households increased by 45% on average since 2008.
  • Pension Wealth and property wealth are the two biggest components of household wealth across all of the regions. Pension wealth is higher than property wealth in all regions except for London. In the capital strong house price inflation has led to a situation, where property wealth is a third higher than pension wealth. In the South East, pension wealth is higher than property wealth, but only slightly so.
  • In Scotland, on the other hand, pension wealth is 80% higher than property wealth. Also in the North East, the North West and Yorkshire and the Humber pension wealth is clearly a more important component of total household wealth.

 

 

Breakdown of total household wealth by region

Growing regions

  • When talking about wealth in the UK, all too often the discussion quickly drifts towards London without taking into account the pockets of wealth across the other parts of the country. In cities all over the UK, wealth accumulation has intensified as people are drawn to urban centres due to employment prospects, educational institutions or cultural offer.
  • However average wealth levels can actually be higher in less populated, prosperous counties in the vicinity of employment hubs. The graph below takes a closer look at a number of cities and their surrounding areas. Specifically, this part of the analysis looks at Greater London, Yorkshire (including York, Leeds, North Yorkshire and East Riding of Yorkshire), Edinburgh (including Lothian), Cheshire (including Chester and Manchester), Cambridgeshire (Cambridge) and Berkshire (Newbury).

Total household wealth of top decile by wealth component, 2008 – 2016*

Top ranking of wealthiest districts from 2008 to 2016*

  • From the top districts with the highest 90th percentile for total household wealth in 2008, six re-emerged in the 2016* ranking, those being: West Surrey. Buckinghamshire, East Surrey, West Sussex, Central Hampshire and West Kent.
  • New Entrants in 2016 to the top ranking are: The Isle of Wight, North Hampshire and Dumfries & Galloway. The Isle of Wight, jumped to number one with a 90th Percentile of total household wealth in 2016 of £2.3 million.
  • Counties that have fallen off the top ranking list are: Warrington, Oxfordshire, Hertfordshire and North Northamptonshire.

90th Percentile Total Household Wealth, 2016*

90th Percentile Total Household Wealth, 2008

Technical note

  • This study is based on data from the Wealth and Asset Survey, a large-scale survey across households in Great Britain.* The first wave of the survey commenced in July 2006, ending in June 2008. The latest wave of the survey started in July 2012 and ran until the end of June 2014, reaching 20,247 responding households.
  • Offering a unique insight into the current distribution of wealth Cebr have ‘nowcast’ the data up to 2016. In particular Cebr used growth factors, which will have affected the stock of wealth, and projected the trajectory of wealth increases on a regional level. The main driving factors behind this projection are house price growth, wage growth, growth in pension savings, growth in disposable incomes and savings rates as well as return on investments over the period.
  • This study focuses on the top end of the wealth distribution. Specifically, we look at the 90th percentile for most of the analysis done. The 90th percentile is the value for which 90% of observations are lower and 10% are higher. For example, if the 90th percentile for total household wealth in the UK lies at £1,000,000 it means that households with more wealth than that are among the wealthiest 10% in the country.
  • The analysis is performed using NUTS3 level data, which refers to counties, unitary authorities, or districts in England, groups of unitary authorities in Wales and groups of council areas in Scotland. Households in Northern Ireland were not sampled in the Wealth and Asset survey. Aggregate figures hence refer to Great Britain rather than the UK.
  • For selected regions of interest, various districts and counties have been grouped together to allow for a comparison on a roughly equal scale.
  • Inner and Outer London boroughs were grouped together as Greater London. North Yorkshire, East Riding of Yorkshire, Leeds and York were grouped together as Yorkshire. Edinburgh, East Lothian, West Lothian and Mid Lothian were grouped together as Edinburgh and Lothian. Cheshire West, Cheshire East and Chester were grouped together as Cheshire.
  • Kleinwort Hambros has commissioned Cebr to investigate how the regional distribution of wealth in the UK has changed over the past 8 years. Much has been written about the economic differences between the South and the North of Great Britain – this report delivers new insights about the prosperity of British households on a much more granular level.
  • Using data from the Office for National Statistics' Wealth and Asset Survey, this report delivers a detailed picture of the different forms of wealth on the national, regional, and sub-regional level.
  • As data for four waves of the Wealth and Asset Survey are available, we can also draw conclusions about the changes in aggregate household wealth over time as well as changes in the contributions from financial wealth, property wealth and pension wealth. To give a more timely picture of the wealth distribution across Great Britain, the data from the latest survey wave in 2014 have been projected forward to 2016.
  • In addition to that, the report examines the constituents of financial wealth in more detail to show how the popularity of various types of financial assets has changed over time.

General risk and regulatory information

General risk information 

The information in this publication is provided for information purposes only and does not take into account the investment objective, the financial situation or the individual needs of any particular person. It is not an offer to buy or sell any particular security or investment. This publication does not constitute advice. All potential investors should seek and obtain advice specific to their circumstances from a qualified financial adviser before making investment decisions.

Important information 

Kleinwort Hambros, the new private banking brand name, combines Kleinwort Benson and SGPB Hambros. The move follows the purchase of Kleinwort Benson by Societe Generale in June 2016, and its subsequent merger with SBPG Hambros to consolidate Societe Generale’s private banking activities in the UK, Channel Islands and Gibraltar. Until full legal merger each bank will operate as an independent entity within the Societe Generale Group and clients will contract directly for banking and / or investment services with one of the entities, either Kleinwort Benson or SGPB Hambros.

Regulatory information 

  • SG Hambros and Kleinwort Hambros are the brand names of SG Hambros Bank Limited, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm reference number is 119250. The company is incorporated in England and Wales under number 964058 and its registered address is 5th Floor, 8 St James’s Square, London SW1Y 4JU. SG Hambros and Kleinwort Hambros are the brand names of SG Hambros Bank (Channel Islands) Limited, which is regulated by the Jersey Financial Services Commission ("JFSC") and the Guernsey Financial Services Commission ("GFSC") for banking, investment and money services business and by the Jersey Financial Services Commission for fund services business. The company is incorporated in Jersey under number 2693 and its registered address is PO Box 78, SG Hambros House, 18 Esplanade, St Helier, Jersey JE4 8PR.  SG Hambros Bank (Channel Islands) Limited – Guernsey Branch’s address is PO Box 6, Hambro House, St Julian’s Avenue, St Peter Port, Guernsey, GY1 3AE. This document has not been authorised or reviewed by the JFSC or GFSC. SG Hambros and Kleinwort Hambros are the brand names of SG Hambros Bank (Channel Islands) Limited, which is regulated for banking, investment, funds services and money services business by the Jersey Financial Services Commission ("JFSC"). The company is incorporated in Jersey under number 2693 and its registered address is PO Box 78, SG Hambros House, 18 Esplanade, St Helier, Jersey JE4 8PR. This document has not been authorised or reviewed by the JFSC. SG Hambros and Kleinwort Hambros are the brand names of SG Hambros Bank (Channel Islands) Limited – Guernsey Branch, which is regulated by the Guernsey Financial Services Commission ("GFSC") for banking, investment and money services business. It's principal address is PO Box 6, Hambro House, St Julian’s Avenue, St Peter Port, Guernsey, GY1 3AE. SG Hambros Bank (Channel Islands) Limited is regulated in Jersey by the Jersey Financial Services Commission ("JFSC") for banking, investment, fund services and money services business. It is incorporated in Jersey under number 2693 and its registered address is PO Box 78, SG Hambros House, 18 Esplanade, St Helier, Jersey JE4 8PR. This document has not been authorised or reviewed by the JFSC or GFSC. SG Hambros and Kleinwort Hambros are the brand names of SG Hambros Bank (Gibraltar) Limited, which is authorised and regulated by the Gibraltar Financial Services Commission for the conduct of banking, investment and insurance mediation business. The company is incorporated in Gibraltar under number 01294 and its registered address is 32 Line Wall Road, Gibraltar.  
  • Kleinwort Benson and Kleinwort Hambros are the brand names of Kleinwort Benson Bank Limited, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm reference number is 119269. The company is incorporated in England and Wales under number 2056420 and its registered address is 14 St. George Street, London W1S 1FE. Kleinwort Benson and Kleinwort Hambros are the brand names of Kleinwort Benson (Channel Islands) Investment Management Limited, which is regulated by the Guernsey Financial Services Commission ("GFSC") for the conduct of investment business. The company is incorporated in Guernsey under number 59377 and its registered address is Dorey Court, Admiral Park, St Peter Port, Guernsey GY1 2HT. This document has not been authorised or reviewed by the GFSC. Kleinwort Benson and Kleinwort Hambros are the brand names of Kleinwort Benson (Channel Islands) Limited, which is regulated by the Guernsey Financial Services Commission ("GFSC") for banking and investment services. It is also authorised and regulated by the UK Financial Conduct Authority ("FCA") in respect of UK regulated mortgage business and its FCA firm reference number is 310344. The company is incorporated in Guernsey with company number 52103 and its registered address is Dorey Court, Admiral Park, St Peter  Port, Guernsey GY1 2HT. This document has not been authorised or reviewed by the GFSC or FCA.