Average wealth climbs in Britain but distribution has grown more unequal

Average wealth has climbed during the 1980s, but its distribution has grown more unequal, and the number of people with no savings at all has climbed.

Average wealth has climbed during the 1980s, but its distribution has grown more unequal, and the number of people with no savings at all has climbed.

Nearly 30 per cent of all Britons have no savings or investment outside their home and pension, and around 10 per cent have no savings at all, according to a new report from the Institute for Fiscal Studies. Most of this 10th consists of single parents and out-of-work couples.

Half the population has less than £750 in liquid savings - up from a figure of £455 in 1991/92. Most people still keep most of their money in a simple bank or building society account.

However, average wealth of £7,136 compares with this median of £750, indicating that the distribution is very uneven. The Institute for Fiscal Studies reports that for the wealthiest 10th of the population, the average level of investments amounts to £50,000, and only the wealthiest quarter achieve an average level of more than £5,000.

The proportion of the population holding shares has increased significantly, up from less than one in 10 households at the beginning of the 1980s to more than one in five by the end of the decade.

The biggest increases in share ownership co-incided with the privatisation of BT and British Gas.

Tax-exempt special savings accounts (Tessas) and personal equity plans (Peps) were taken up widely, by about one in 10 people in each case. But they were held mainly by the wealthiest groups as the median wealth of Tessa and Pep owners is 20 times that of the population at large.

The spread of home ownership has been another key change in savings patterns during the past 25 years, with the proportion of households buying their own home up from half to nearly two-thirds between 1976 and 1996.

The figures show how much rests on the success of the government's Individual Savings Accounts, which are meant to encourage saving by people who have not saved much in the past. The report says the low level of liquid assets also places a question mark over the use of the tax system to encourage private saving for retirement.

"Should the government really use the tax system to encourage them to lock up their wealth for the long term when their income or spending needs might fluctuate in the short term?" it concludes.

It also says that financial exclusion at the bottom of the scale has worsened.

"The groups who make up the new poor in terms of income are also the least likely to have any wealth. The fact that they are not able to save means they are more likely to be poor .... in the future as well."