Economic statistic of the week: who has the bulk of savings?

Today’s statistic is courtesy of the Office of National Statistics and their video podcasts (a rather unpublicised source of information given its clarity, relevance and yet low viewership figures).

This graph looks at pension savings for the age group 54 – 64 held by households and sorts households into deciles based on how much savings they have (not, as is often the case with similar graphs, by income or expenditure). As you can see the 10% of households with the most household saving actually have almost half of all household savings:

ONS savings graph

(It’s from 5:03 in to the YouTube clip here.)

That’s quite a remarkable concentration of the bulk of savings in very few hands, and it is a concentration very rarely, if at all, mentioned when the impact on savers of changes in interest rates or tax rules are talked about.

Conversely, it also helps explain why the £4 billion per full year being raised by the government in cutting tax breaks for pension savings have attracted so little attention as it comes from a very small number of people for such a large sum. (Though, ironically, in this case the lack of attention is probably a drawback, at least as far as Liberal Democrats are concerned, because it’s one example of taxing the rich more which it almost never mentioned when the government’s track record is discussed).

Note: post updated to clarify exactly what savings data is being talked about.

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  • Good post.
    My recollection is that ONS does not include the right to a basic pension. At current annuity rates, the right to the basic pension is worth about a third of a million per (two adult) household, at the point of retirement. This is a huge equalisation of wealth that is not captured in graphs such as this one.

  • matthew fox 29th Apr '11 - 1:17pm

    Economic Stat of the Week must have been the further decline of UK Consumer Confidence, strange how LDV missed that.

  • Simon McGrath 29th Apr '11 - 2:37pm

    It would also change the figures if you took into account the effect of public sector pensions. If i have a pension of say £10,000 a year from a personal pension it would need a lump sum of around 200-300k (depending on age etc). that would appear in the data – a public sector (or private sector DB pension) wouldn’t.

    It would also be instructive to look at the figures by age. savings also skewed by age (which is logical) so some of the concentration effect will be caused by that.

  • Hi Mark

    isn’t your post a little misleading? It seems to infer that this is for the whole of the UK, whereas ONS are talking about the pension savings for the age group 54 – 64. So when you look at the graph you have to consider that these are the people who have had the longest period to accumulate a pension pot (and as Tim points out, it only includes private pension savings, not the value of any state pension due).

    “…as it comes from a very small number of people for such a large sum…”
    After the post the other day (“Frankly, dog whistle politics would be preferable to this”) – surely you mean a small percentage of people? Also I would suggest that this is the group of people least likely to go on the rampage but are more likely to vote.

    @ .Chris Squire Posted 29th April 2011 at 1:52 pm
    ‘Savings’ is for the most part a euphemism for ‘inherited wealth’
    It may be, but it’s not so certain that it is the case here. According to the ONS the bulk of the savings is in Pension Saving (73%) which may imply that the money was saved over a very long period.

  • I think that this also excludes housing wealth. Two thirds of households are owner occupiers, and so by age 55-64 most will own the majority of their house. Yet deciles 3 and 4 have only trivial savings. Savings in this case means monetary savings only, I think. The richest 10% have about £400k on this graph, which must exclude housing. I even wonder if it excludes all pension savings, and just means traditional savings, plus perhaps shares? It might not even include second homes…

  • tim leunig Posted 29th April 2011 at 11:28 pm

    Hi Tim. it does exclude the primary home as they consider that people won’t sell that to fund their retirement. But it does include second homes or buy to let properties.

    The bulk of the savings is pension savings, they also show the % for financial and property savings (18% & 9%).
    Simon McGrath made a good point earlier about public sector pensions, I have a preserved Forces pension which I rarely think about and wouldn’t include in a survey about savings. Using the figures he gave that could be classed as being worth circa 100 – 150 k. There are obviously lots of people who may be in a similar position as myself.

    It is a shame that 10 year age blocks were used and not 5 year blocks. At 54 you may still have large mortgage payments and kids at university which will obviously reduce the chance to save. I would guess (and it is just a big guess) that the majority of those at the top 50% are in the final 5 years and the reverse for the bottom 50%.

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