Wealth and Assets in Scotland, 2006–2014

4 The Distribution of Wealth Components by Decile

This section provides information on how each of the four wealth components -financial, private pension, property and physical wealth - is distributed across the population. As for the analysis of the distribution of total net wealth, this section presents the components of wealth by decile. This allows the share of financial wealth, private pension wealth, property wealth and physical wealth owned by the wealthiest 10% of households to be calculated, and to be compared to the share of wealth owned by the bottom half of households.

In this section, deciles have been drawn on the basis of the distribution of the relevant wealth component. The households in a given decile are therefore not necessarily the same households as in the equivalent decile for household total net wealth discussed above.

4.1 Financial wealth (net)

Net financial wealth was the most unequally distributed of the four wealth components. Chart 4.1 shows the value of net financial wealth, by decile. The share of financial wealth, by decile, is shown in chart 4.2.

In 2012/14, the wealthiest 10% of Scottish households:

• Owned 66.8% of household net financial wealth (£68.4 Billion) ^[6] .
• Continued to increase the value of net financial wealth owned in 2012/14.
• Had 32.8 times the net financial wealth of the bottom 50% of households combined. The bottom 50% represented a 1.9% share of financial wealth, worth £2.1 billion ^[7] .
• Had twice the net financial wealth of all other deciles combined ^[8] .

When considering the total values of financial wealth in 2012/14, the least wealthy 50% of Scottish households combined had almost no household net financial wealth, with the bottom 20% having net negative financial wealth of £3.1 billion (that is when their outstanding financial liabilities exceed the value of financial assets). This trend was similar across all survey periods. In 2012/14, however, net negative financial wealth of the least wealthy 10% of Scottish households decreased for the first time compared to previous survey periods.

In 2012/14, half of all Scottish households had household net financial wealth of £3,400 or more ^[9] . In comparison, the median value of net financial wealth for Great Britain in the same period was £5,900.

Chart 4.1 Value of household net financial wealth by decile 2006/08 - 2012/14

Source: Wealth and Assets Survey, ONS

Chart 4.2 Share of household net financial wealth by decile 2006/08 - 2012/14

Source: Wealth and Assets Survey, ONS

4.2 Private pension wealth

Private pension wealth is the second most unequally distributed wealth component. Many individuals and households have zero, or very little, private pension wealth. Pension wealth is built up through a working life, and hence is closely connected with age and life stage.

Chart 4.3 below shows the value of private pension wealth by decile, with the share of private pension wealth by decile shown in chart 4.4.

In 2012/14, the wealthiest 10% of Scottish households:

• Owned 54% of private pension wealth, worth £227 billion.
• Had increased the value of private pension wealth significantly in 2012/14, following decreases in previous years.
• Had 22.6 times more private pension wealth than the bottom 50% of households combined. The least wealthy 50% of households owned 2.4% of private pension wealth, worth £10 billion.

In 2012/14, the median value of private pension wealth in Scotland was £47,000 ^[10] . This means half of households had accumulated private pension wealth of £47,000 or more, and half of households had private pension wealth less than £47,000. In the same period, the median household private pension wealth for Great Britain was almost identical (£47,100). However, if the same median is considered excluding households with zero private pension wealth ( i.e. including only those households that had contributed to private pension schemes), then half of households contributing to private pension schemes in Scotland had accumulated £112,000 or more of private pension wealth. In comparison, the same median excluding households with zero private pension wealth for Great Britain was £97,300.

Chart 4.3 Value of private pension wealth by decile 2006/08 - 2012/14

Source: Wealth and Assets Survey, ONS

Chart 4.4 Share of household private pension wealth by decile 2006/08 - 2012/14

Source: Wealth and Assets Survey, ONS

Automatic workplace pension enrolment

Automatic enrolment for pensions was introduced in October 2012. Once fully implemented, automatic enrolment aims to increase the number of individuals newly saving, or saving more, in a workplace pension, and increase the amount that is being saved in workplace pensions. The reforms require employers to automatically enrol eligible employees into a qualifying workplace pension scheme and pay a contribution in the form of tax relief. The automatic enrolment duties are being staged between October 2012 and February 2018 by employer size, starting with the largest employers. The July 2012 to June 2014 WAS data collection period was predominantly following the October 2012 introduction, so WAS data for wave 4 may reflect some changes in pension membership and wealth due to automatic enrolment. However, as the implementation is staged, it may not be until the next wave before the WAS data fully captures the changes. The statistics for all data periods predate the pension flexibilities reform that was introduced in April 2015.

The first three survey periods of WAS took place before the introduction of 'automatic enrolment' in October 2012. The fourth data collection period of WAS (2012/14) was predominantly following the introduction of the new law. Therefore, it was expected that this period may reflect some increases in pension membership and wealth.

While the wave 4 WAS data presented in this report does not appear to reflect increases in pension membership, analysis by the Institute for Fiscal Studies ^[11] suggests automatic enrolment increased pension saving across the UK by April 2015 (included in the next wave of the WAS). The IFS suggest the increase in pension saving was largely from increases in pension membership, particularly for younger employees (aged 22 to 29) and relatively low earners on between £10,000 and £16,000 per year. Significant numbers of those not directly targeted by the policy have also been brought into workplace pensions, such as those earning less than £10,000. However, with lower provision of Defined Benefit ( DB) pensions, introduction of 'auto-enrolment' means that younger cohorts have higher overall pension membership than their predecessors did but at lower levels of generosity ^[12] .

4.2.1 Private pension contributions by age and gender

This section explores membership of, and the value of wealth held in, private pension schemes to which individuals are currently contributing. It therefore does not include the pensions that an individual may have contributed to in the past but is no longer contributing to, or pensions from which an individual is receiving an income.

In 2012/14, a third (30.3%) of adults in Scotland aged 16 and over were contributing ^[13] to a private pension ^[14] . There was a small decrease in the proportion of people contributing to a private pension in the latest period, down from 34.0% in 2010/12. While fewer people in Scotland were contributing to a private pension than across the UK, the small decrease in the proportion of people in Scotland contributing to a private pension reflects the situation across the UK.

Table 4.1 shows men were more likely to be contributing to a private pension (33.6%) than women (27.4%). For both survey periods, occupational defined benefit ( DB) pension schemes were the most common type of private pension contribution; however the proportion of adults in Scotland contributing to a DB pension decreased by 3.8 percentage points in 2012/14 with this decrease equally felt by both men and women (both round 4 percentage points).Employees in the public sector are more likely to contribute to a private pension scheme than those in the private sector. In the public sector, occupational pensions are predominantly DB schemes, which tend to have greater wealth than defined contribution schemes. The decrease in public sector employment in Scotland, particularly for men, may have had an impact on the decrease in the number of people contributing to DB pensions in 2012/14 ^[15] .

Table 4.1 Percentage of individuals in Scotland aged 16 and over that currently contribute to a private pension scheme, by pension type and sex 2010/12 - 2012/14 ^[16]

	2010/12			2012/14
	Men	Women	All	Men	Women	All
No current pension	62.9	68.9	66.0	66.4	72.6	69.7
Any type of pension	37.1	31.2	34.0	33.6	27.4	30.3
Occupational DB only	18.3	21.6	20.0	15.3	17.2	16.2
Occupational DC only	7.9	4.9	6.4	8.9	6.1	7.4
Personal pension only	7.9	3.1	5.4	6.6	2.6	4.5
More than one type	3.1	1.6	2.3	3.0	1.6	2.2

Source: Wealth and Assets Survey, ONS

The percentage of people contributing to a private pension scheme varies significantly by age. Table 4.2 shows less than 3% of those contributing to a private pension scheme in 2012/14 were young people (aged 16 - 24 years). In the latest wave, the age profile of those making contributions to a private pension has increased. In 2012/14, 53% of people making contributions to a private pension were 45 years or older - compared with 46% in 2010/12.

Table 4.2 Percentage of individuals in Scotland aged 16 and over that currently contribute to a private pension scheme, by age 2010/12 - 2012/14 ^[17]

	2010/12	2012/14
16 - 24	4.4	2.9
25 - 34	22.8	19.6
35 - 44	26.8	24.4
45 - 54	30.1	33.3
55 - 64	15.4	18.3
65+	0.6	1.6

Source: Wealth and Assets Survey, ONS

4.3 Property wealth (net)

Property wealth is the third most unequally distributed wealth component. Charts 4.5 and 4.6 show the distribution of property wealth across the population, and the share of property wealth by decile.

In 2012/14, the richest 10% of Scottish households:

• owned 42.5% of household net property wealth which accounted for £102 billion ^[18] ;
• increased the value of property wealth owned in 2012/14, following decreases in previous years;
• owned 7.9 times more than the bottom 50%. The bottom 50% of Scottish households combined owned 5.4% of household net property wealth which accounted for £12.9 billion ¹⁸.

The least wealthy 30% of Scottish households combined had no property wealth. This reflects that fact that many in this group rent their home, and therefore have no property wealth. However, property owners in the bottom 10% had net negative property wealth (that is when their outstanding mortgage liabilities exceed the value of properties owned). This trend was similar across all survey periods; although, net negative property wealth of the least wealthy 10% has started to deepen since the second survey period of 2008/10.

Some families rent their homes throughout their lives - either though choice or because they cannot afford to buy. Only households who own property can accumulate any property wealth.

Households that do buy a house are likely to accumulate more property wealth as they get older. Younger families are more likely have low net property wealth as their properties are more heavily-mortgaged than those of older households. By pensionable age however, many families who own their own home are likely to be coming to the end of their mortgage or will own their property outright, and so their net property wealth is the value of the property.

For older households, net property wealth will also capture any increase in property values over their period of ownership. Property values increased rapidly prior to the global financial crisis in 2007/08, especially for those who bought property in the 1970s. Many households who owned their own home at that time will have seen large increases in net property wealth as a result. Younger households buying during or after the crisis may not have experienced the same increase in net property wealth.

In 2012/14, median household net property wealth for Scotland was £60,000, meaning half of all Scottish households had net property wealth of £60,000 or more and half had net property wealth of less than £60,000. In the same period, the median household net property wealth for Great Britain was £85,000 ^[19] .

Chart 4.5 Value of household net property wealth by decile 2006/08 - 2012/14

Source: Wealth and Assets Survey, ONS

Chart 4.6 Share of household net property wealth by decile 2006/08 - 2012/14

Source: Wealth and Assets Survey, ONS

4.4 Physical wealth (gross)

In contrast to the other wealth components, every household has some accumulated goods and contents. Therefore, household gross physical wealth was the most equally distributed of the four wealth components across all survey periods. Charts 4.7 and 4.8 show the value and share of physical wealth ownership across the population, by decile.

In 2012/14, the richest 10% of Scottish households:

• owned 34% of gross physical wealth which accounted for £37.1 billion;
• were 2 times wealthier than the second wealthiest 10%;
• were 1.85 times wealthier than the bottom 50%. The least wealthy 50% of Scottish households owned 18.4% of household gross physical wealth which accounted for £20 billion.

In 2012/14, the median gross physical wealth for Scotland was £35,000, which means that half of households had gross physical wealth of £35,000 or more and half had less. The median gross physical wealth has not change dramatically over the 4 waves of the survey, and is similar to the 2012/14 median across Great Britain as a whole, which was £35,300.

Chart 4.7 Value of household gross physical wealth by decile 2006/08 - 2012/14

Source: Wealth and Assets Survey, ONS

Chart 4.8 Share of household gross physical wealth by decile 2006/08 - 2012/14

Source: Wealth and Assets Survey, ONS