Typical worker ‘would need to save over a lifetime’s earnings to become wealthy’

Britain’s wealth gaps mean that a typical worker would need to save more than a lifetime’s worth of earnings to become wealthy, according to analysis by a think tank.

The Resolution Foundation said that it would take 52 years’ worth of typical earnings – £1.3 million in total – to move from the middle to the top of the wealth distribution.

“Entrenched” wealth gaps mean that who your parents are – rather than how hard you work – has grown in importance in shaping living standards over a lifetime, the foundation said, with families who already have assets benefiting disproportionately from Britain’s wealth boom.

The report said: “The stability of key measures of UK wealth inequality over recent decades masks a significant widening of absolute wealth gaps.

“These gains have flowed disproportionately to older, asset-rich households and homeowners in certain regions – particularly London.

“The result is a wealth landscape that is both highly unequal and harder to climb, as saving alone is no longer enough to shift a household’s position in the distribution.”

The document said: “Britain’s wealth has expanded dramatically over recent decades, fuelled largely by periods of low interest rates and a sustained surge in asset prices.”

The research, which used data from the Office for National Statistics (ONS) Wealth And Assets Survey, said household wealth reached £17 trillion in 2020-22, of which £5.5 trillion (32%) was held in property and £8.2 trillion (48%) in pensions.

The report said: “As a result, Britain’s wealth reached a new peak of nearly 7.5 times GDP by 2020-22, up from around three times GDP in the mid-1980s.

“Yet, despite this remarkable increase in the overall stock of wealth, relative wealth inequality – measured by the share of wealth held by the richest households – has remained broadly stable since the 1980s, with the richest tenth of households consistently owning around half of all wealth.”

Researchers said it took 38 years’ worth of median full-time earnings to move from the fifth to the 10th decile in the wealth distribution in 2006-08 – but by 2020-22 this had grown to 52 years’ worth.

This means a typical full-time employee, even if they were miraculously able to save all their earnings across their entire working life, would still be unlikely to reach the top of the wealth ladder.

The gap in average family wealth per adult between the middle and the top deciles has grown from £1 million in 2006-08, to £1.3 million by 2020-22, in real cash terms.

The report said that the majority (53%) of the increase in household wealth since the start of the 2010s was from “passive gains,” such as rising house prices, rather than active behaviour on the part of households, such as acquiring new assets.

This increase has primarily benefited the already-wealthy, with gains flowing disproportionately to older, home-owning families, worsening intergenerational inequality, according to the Foundation.

It said the wealth gap between people in their early 30s and people in their early 60s has more than doubled between 2006-08 and 2020-22 – from £135,000 to £310,000, in real cash terms.

Wealth is also unevenly distributed between regions, with median average wealth per adult in 2020-22 standing at £290,000 in the South East and exceeding £200,000 in both the East of England and the South West.

The report said: “In contrast, typical wealth holdings were much lower in the North of England, with median wealth per adult at around £140,000 in the North West and £110,000 in the North East.

“London had the lowest median wealth per adult of all regions, at just £80,000.

“Previous research showed that incomes, demographics and house prices together largely explain the differences in levels of wealth across Britain; for example, there is a strong correlation between wealth holdings and incomes around the country, reflecting differences in the scope for households to actively save out of incomes to build up wealth.

“But we shouldn’t think that region is the most important determinant of household wealth: the distribution of wealth within each area is highly uneven, and in most cases has become more so since before the financial crisis.”

The report said property wealth has been a key driver of wealth inequalities in London, due to both house price surges and inequalities in homeownership there. By contrast, the South East has a more even distribution of wealth on this measure, indicating that gains from rising house prices have been spread more evenly across families there, the report said.

Among families on lower incomes, securing employment tends to be the biggest driver of upward wealth mobility, the report said.

The foundation’s work focuses particularly on households with low and middle incomes, those on low pay or in precarious work, and those vulnerable to financial shocks.

Molly Broome, senior economist at the Resolution Foundation, said: “Wealth gaps in Britain are now so large that a typical full-time employee saving all their earnings across their entire working life would still not be able to reach the top of the wealth ladder.

“These gaps are doubly concerning as wealth mobility in Britain is low – people that start life wealthy tend to stay wealthy, and vice versa.

“Rising house prices and changes in the value of pension promises account for most of the growth in wealth gaps since the early 2010s, rather than any active behaviour on the part of individuals, such as buying homes or acquiring new assets.

“Soaring wealth and an acute need for more revenue has prompted fresh talk of wealth taxes ahead of the Budget next month, but with property and pensions now representing 80% of the growing bulk of household wealth, we need to be honest that higher wealth taxes are likely to fall on pensioners, southern homeowners or their families, rather than just being paid by the super-rich.”