According to a recent Financial Times article, one in five people aged over 65 is a millionaire.
Which isn’t to say that they’re driving around in Rolls-Royces and sipping champagne, of course. Instead, it simply means that the sum of their property wealth, investments, and savings, exceeds £1 million.
The finding comes from wealth managers Netwealth, who analysed data from the Office for National Statistics’ Wealth and Assets Survey, 2006‑2016. So dodgy survey data this isn’t: to the best of the Office for National Statistics’ data collection abilities, one in five over-65s is a millionaire.
A bigger pie, a bigger slice
Now, one point needs making straightaway.
Namely, it’s in the nature of things for older people to be better off than younger people: they’ve had more time to accumulate wealth.
What is surprising is the extent to which older people’s share of the nation’s growing wealth has also grown—up from 28% of total household wealth in 2006, to 36% in 2016.
Put another way, at a time of life when people are supposed to be ‘deaccumulating’, to use the jargon, they’re doing anything but. Instead of consuming their wealth in old age, they’re still building it.
Conversely, those aged under 45 are sitting on a shrinking proportion of the nation’s wealth. Those aged 25‑34 own just 3p of every £1 of household wealth.
Fortune on a plate
It’s not difficult to see why the older generation has done so well.
Soaring property prices, well-funded final salary pensions, benign economic conditions, a buoyant stock market—as someone in my mid-60s, I’m well aware of the helping hand our generation has received.
What’s less clear is just what the younger generation—those under 45, say—can do, apart from waiting to inherit some of this largesse.
And here there are no easy answers.
More than any other generation in recent decades, perhaps, those now in their twenties and thirties are going to have to work hard, save, and invest.
Investing has never been this easy
The good news, compared to when today’s 60-somethings and 70-somethings were in their twenties and thirties, is that this has never been easier or cheaper.
As I’ve remarked before, the days of traditional ‘full service’ brokers were expensive. Somewhere, I have a share certificate dating from when my father purchased some Marks & Spencer shares in the early 1990s.
The commission levied on his modest purchase? £31—the broker’s minimum charge. These days, a quarter of a century on, you can expect to pay around a tenner, using today’s online execution-only brokers.
The tax situation has been transformed, too. Today, you can shelter £20,000 a year in an ISA, meaning that for most people, their wealth-building is free from both income tax and capital gains tax.
Pensions, too, make decent long-term tax-advantaged investments—especially in times like these, when employers’ final salary schemes are either non-existent (as is the case in much of the private sector), or subject to government intervention.
A different era
Simply put, what all that means is that more of your money goes towards wealth accumulation and future prosperity, and less goes towards middlemen and taxes.
Throw in the abundance of advice and guidance available through the Internet, and the days of Sunday newspaper tips and dusty stockbrokers’ research seem quaint and long since outmoded.
Put another way, the present older generation has prospered from one set of advantages. Tomorrow’s older generation—today’s younger generation—will prosper from another set.
Tomorrow starts today
In summary, then, my take is that while the situation is concerning, it’s not bleak.
But there’s no escaping the harsh reality that—more than they may suspect—those under 45 are the masters of their own destiny here. The ‘nanny state’ and generous employers can’t be relied upon.
“Spend a little less, save and invest a little more,” has always been good advice. For the younger generation, it needs to start becoming a way of life.