UK’s Working Wealthy are cash-cautious following recession
The recession has knocked the confidence – but not the cash reserves – of Britain’s Working Wealthy, according to a study by Hiscox.
The Hiscox Wealth Review 2009 reveals that more than 2.5 million UK households are now identified as wealthy, with an average annual income of almost £93,000* – close to three times the national average household income of £35,000**. However, despite many having a healthy income, more of the UK’s top earners than ever – 95% in fact – do not consider themselves to be wealthy***.
Rich in cash, poor in psyche
The recession has left its mark on the psyche of the Working Wealthy with a lack of confidence impacting their perceptions of wealth and appetite for risk. Whilst two in five (41%) say the recession has not had an impact on the amount of money they have to spend, almost an equal number (44%) say they are fearful of the future and have been steadily stockpiling cash.
As a result, the Working Wealthy have made cutbacks across the board – spending on socialising and restaurants has been slashed by 49% of them, as well as holidays (41%), weekend breaks (43%) and home décor (38%). In fact, one in three (30%) are spending more in discount stores.
Rich redefined
Despite some households owning valuable art (10%) and jewellery (11%), having savings of more than £25,000 (26%) and going on two or more overseas holidays a year (25%), the Working Wealthy believe that to feel truly rich in 2009, they would require an average household income of £152,865****, as well as:
- Owning more than one property (35%), or a holiday home (27%)
- More than £20,000 per year disposable income (48%)
- Being mortgage free (31%)
- Driving a luxury car such as a Ferrari (26%)
- Owning original pieces of art (13%)
Looking after what’s important
While they may not consider themselves to be rich, many (68%) of the Working Wealthy believe it is very important to be happy with what they do have, with many citing family (85%), health and well being (80%) and new life experiences (22%) as top priorities. For those questioned, 60% class their home and 11% class their possessions as very important, which comes as no surprise considering the amount of investment made – according to Hiscox data, the average Working Wealthy household says they own over £88,000 worth of household goods and £11,000 worth of valuables such as jewellery and watches*****.
Steve Langan, managing director, Hiscox UK, says: “The report shows that whilst the economic downturn may have left the wallets of many of the Working Wealthy intact, they have suffered a crisis of confidence and have scaled back their spending and exposure to risk.
“However, it’s more important than ever for the Working Wealthy to keep stock of what they do have and understand their affluence. Because they don’t feel well-off, it is all too easy to underestimate the value of what they do have. This means there is a real danger of them not making enough provision to protect themselves and their possessions which they hold dear - an interesting paradox given that many feel that they are taking less risk generally.”
Read the full Hiscox Wealth Review 2009 (PDF, 1MB)
Hiscox statistics used in the study were provided by YouGov Plc unless otherwise stated. Total sample size was 1,130 AB professionals. Fieldwork was undertaken between 28 September 2009 - 1 October 2009. The survey was carried out online.
* 2,532,000 households have an average annual gross income of £92,936. Office for National Statistics: The effects of taxes and benefits on household income, 2007-2008
** The average annual gross household income is £35,164. Office for National Statistics: The effects of taxes and benefits on household income, 2007-2008
*** 95% do not consider themselves to be wealthy according to the Hiscox Wealth Review 2009, compared to 91% who did not consider themselves to be wealthy in the Hiscox Wealth Review 2008
**** The ‘average annual household income needed to feel rich’ is calculated using an average response from respondents from a selection of salary banks ranging from £28,000 or less to £301,000 or more, with the top factor being £350,000
***** According to Hiscox. Analysis based on the average sums insured of Hiscox 505 Home and Contents Insurance customers as at August 2009
