According to a think tank, the average wealth gap between households in their 30s and their parents’ generation in their 60s has narrowed by £86,000 over the past five years.
Britain’s “wealth boom” has begun to slow as interest rates begin to rise in response to the recent shock to inflation. Resolution Foundation said.
The Bank of England’s base rate rose by 0.1% to 5.25%, with two recent cuts to 4.75%.
We can be sure that more wealth will be passed down from generation to generation. This raises the question of how young people can hope to get ahead in life without the support of family wealth.
Simon Pittway, Resolution Foundation
The researchers found that in 2018-20 the typical household wealth of someone in their 60s had fallen by 16 per cent over the past five years, from around £470,000 to £390,000 in today’s prices.
In 2018-20 the average wealth of someone in their 30s has risen by 17 per cent over the past five years, from around £50,000 to £59,000, only partly due to rising house prices before and during the pandemic. Decreased due to high interest rates. and inflation.
As a result, the average wealth gap between these two groups has narrowed in real terms by just £86,400, from £416,354 to £329,934, the foundation said, marking the smallest gap in more than a decade. while doing
The report, published as part of a partnership with the abrdn Financial Fairness Trust, says that despite the recent decline, much of the wealth remains to be passed down through generations in the form of inheritances and gifts.
The foundation said policymakers should continue to help vulnerable households build financial buffers and reform the tax system to ensure that the wealthiest pay their fair share.
Simon Pittway, senior economist at the Resolution Foundation, which focuses on improving the living standards of low- and middle-income earners, said: “For most of the last four decades, Great Britain has enjoyed an uninterrupted rise in wealth.
“Falling interest rates have boosted pension pots and house prices, and household wealth has reached a real level of £21 trillion as early as 2021.
Not only are the wealthiest people more likely to receive an inheritance or a gift, but they also receive large sums of money…
Mubeen Haque, in the name of Financial Fairness Trust
“Rising levels of wealth have not increased inequality here as it has in the US.
“Higher homeownership has reduced inequality among older households, although the decline in later homeownership has widened the wealth gap between them and younger households.
“But rising interest rates have seen household wealth fall by more than £2 trillion, with the over-60s seeing the biggest drop in wealth.
“While there is no guarantee that rising wealth will resume, we can be sure that more wealth will be passed down through the generations.
“This raises the question of how young people can hope to get ahead in life without the support of family wealth.”
Mubeen Haq, chief executive of the Aberdeen Financial Fairness Trust, said: “Not only are the wealthiest people more likely to receive an inheritance or a gift, but they also receive large sums of money…
“Such storms can be critical in determining who gets a foot on the housing ladder and potentially increase wealth inequality.”