UK Household Wealth Shows Healthy Growth of 12% in the Past Year
In recent news, UK household wealth has seen a significant increase of 12% over the last 12 months. The rise in household wealth, encompassing savings, investments, and physical possessions, can be attributed to factors such as pay rises, improved savings rates, better investment performance, and efforts to pay off debts. The Financial Health Report from St. James’s Place (SJP) offers insights into the current financial landscape in the UK, highlighting both positive and challenging aspects of the financial well-being of households.
Despite the overall growth in wealth, a considerable portion of the population (58%) still does not feel financially comfortable. The report indicates that the cost of living strain has caused more people to experience a worsening financial situation rather than an improvement. Notably, a quarter of the country expresses anxiety about the year ahead, underscoring the importance of having a robust financial plan in place to navigate uncertainties.
The research reveals that while the average household wealth has increased from £113,154 to £126,483, there remains a significant wealth divide between individuals on lower and higher incomes, currently standing at £570,864. Factors contributing to improved financial situations include receiving a pay rise (31%), better savings rates (27%), and investment performance (21%). However, a notable 15% attribute their financial improvement to paying off debts.
Interestingly, the report delves into the impact of financial resilience, with 26% of respondents acknowledging a lack of financial resilience to deal with unexpected expenses. This group estimates needing an additional £61,902 in total household wealth to address this gap. Furthermore, the research highlights that having a financial plan significantly correlates with improved financial health, with individuals possessing a plan being on average £110,000 better off compared to those without one.
Moreover, the importance of seeking professional financial advice is underscored, as individuals who have received such advice have seen a further increase in their wealth to an average of £236,897. Financial planning not only enhances wealth but also bolsters confidence in financial positions, with 65% of those with a plan feeling more secure. Additionally, individuals with a financial plan are more likely to describe their financial position as comfortable and exhibit greater financial resilience compared to those without a plan.
The report also sheds light on the generational differences in financial planning, highlighting that younger individuals are more proactive in establishing financial plans than older age groups. Those under 35 are shown to be particularly engaged in setting financial goals and taking actions to enhance their income, such as leveraging various income streams and monetising skills like social media engagement.
As per Alexandra Loydon, Director of Advice Policy & Operations at St. James’s Place, while there are positive indicators of increased wealth, challenges such as high energy and living costs persist, impacting individuals’ ability to save and invest for the future. The widening wealth gap further underscores the need for sound financial planning to navigate economic uncertainties effectively.
In conclusion, the rise in UK household wealth signifies positive economic momentum, yet the disparities in wealth distribution and the prevalence of financial challenges highlight the importance of proactive financial planning. By identifying financial goals, assessing finances, building emergency funds, and seeking professional advice, individuals can enhance their financial well-being and resilience in the face of economic fluctuations.