The new ONS survey of wealth reveals that the proportion of households with a savings account has slumped from 68% to 58% between 2008/10 and 2010/12. It’s not the only fall in the use of savings or investment products. There is a 6 percentage point fall in the proportion of households that have National Savings certificates or bonds. And no change in our propensity to buy our Government’s bonds: just 1% of us own those.
Now it may be that we’re really smart. After all interest rates have been low during this period, perhaps we’ve shifted our money into higher yielding products. Not so. In fact the median value for credit balances in current accounts – typically the lowest yielding financial asset of all – has gone up from £1,000 to £1,200. And the proportion of households owning shares has fallen from 16% to 12%; there are also drops in numbers of those holding fixed term bonds and unit or investment trusts.
From these numbers it doesn’t look like we’re out in the market searching for yield. We’re letting our money sit in current accounts, where it’s not earning much of a return but it’s very safe, guaranteed by the government’s deposit guarantee.
But hang on, what about the effect of the recession? Presumably one of the reasons we don’t own as many financial assets as before the crisis is that we’re having to spend our money due to the pressure on living standards. Better to keep it in a current account where we can access it quickly to meet day to day requirements rather than squirrel it away.
Strangely though, the recession seems to have had very little effect on the net financial wealth of people with modest amounts of it, whom we might expect to be under real pressure on their living standards. In 2006/08, 16% of households had net financial wealth between £500 and £5,000, that dropped hardly at all to 15% in 2008/10 and has since popped back up to the previous level. The median value in this band of wealth remained £2,000 throughout. Looking at the next band – net financial wealth between £5,000 and £12,500 – the proportion of households in this category was steady at 11% throughout the 6 years since the first survey in 2006 and the median value of £8,000 was again unchanged.
This suggests that households with modest amounts of wealth have sought to safeguard their financial assets rather than eating into them; and that they have dealt with the pressure on living standards in some other way, e.g. as our Riders on the Storm report suggested, by changing what they buy, or getting a second person in the household into work.
In other words, we might not be the savviest consumers of financial products but we’re savvy in other ways.
There is one other significant development in motion at the same time: the rise in pension wealth. The median pension wealth of men aged 55-64 has gone up from £134,500 in 2006/08 through £161,200 in 2008/10 to stand at £174,100 in 2010/12. The equivalent rise in the pension wealth of women aged 55-64 is £66,100/£86,800/£99,100. Putting that in percentage terms, it’s an almost 30% jump in pension wealth for men in this age group and almost 50% for women. These are big changes and perhaps help to explain why the use of other financial products and investments is more limited.
There is one massive caveat though: only 58% of people have a private pension at all, that figure rising by a single percentage point since 2006/08.