Wealth and Assets in Scotland, 2006–2014

10 Conclusion

Wealth in Scotland continues to increase

This report has set out the substantial and increasing level of wealth in Scotland. The value of total wealth increased by 22% in 2012/14 to £865.6 billion. The increase in wealth, both before and after private pensions are considered, was the largest since 2006/08, with increases in all wealth components compared to 2010/12.

But considerable inequality in wealth ownership remains - and this shows no change

Scotland - like the rest of Great Britain - faces stark inequalities in wealth, with the wealthiest 10 per cent owning 43% of all private wealth, 67% of financial wealth, 54% of pension wealth, and 43% of all property wealth. The wealthiest 1% alone owned more wealth than the bottom 50%.

In comparison, the least wealthy 30 per cent of the population owned less than 2% of all private wealth - including very little or no financial wealth, pension wealth, or property wealth.

Inequality in wealth ownership in Scotland increased in 2012/14: the situation of the bottom 40% of households worsened against the top 10%. The wealthiest 10% of households owned 9.4 times the net household wealth of the bottom 40% in 2012/14, compared with 8.8 times in 2010/12.

Inequality in wealth ownership in Scotland was slightly lower than for Great Britain.

Particular household types are at risk of low wealth, with a continuing decline in young people's prospects compared to other generations.

Wealth accumulation is a process that occurs over an individual's lifetime. Younger households are less likely to have accumulated wealth as they tend to be at the beginning of their careers and earning lower wages: moreover, regardless of their earnings, have simply had less time to accumulate wealth. Pensioners, especially those in couples, have a lower risk of low wealth than other household types, reflecting homes that have their mortgages repaid, accumulated increases in property values over long periods, and accumulated pension wealth.

In comparison, single adult and single parent households have a high risk of low wealth and the associated propensity for household bill arrears, borrowing, and low levels of savings. These groups also have the highest risk of poverty - indicating low wealth is linked to low income. These low wealth groups own very little in assets, with no financial or pension wealth, and are significantly less likely to own property. For many in this group, the only assets owned are their household contents and, even then, the value owned is considerably lower than for other households.

Being in employment is not a protection against poverty and low wealth. Nearly half of low wealth households have an adult in employment - and more than half of working age adults in poverty were in employment. A number of socio-economic factors contribute to a significant risk of low wealth, many of which are interlinked. Those in low wealth households in employment are more likely to be headed by someone without qualifications, in routine or manual occupations. Often this employment is low paid, and can be temporary, and the experience of low pay can be long lasting ^[35] .

The expectation that households work through their lives to build wealth and be comfortable at retirement may not hold in the future. Evidence from the Intergenerational Foundation ^[36] suggests there are intergenerational divides appearing in wealth ownership in the UK, with prospects for the younger generation declining. A number of factors contribute to this poor outlook: increasing debt (including student debt); house prices increasing faster than income; changes in the labour market where young people are more likely to start on insecure work and low pay; a lack of growth in pay particularly for younger workers; under-employment for many graduates who are not using the skills they gained in higher education; and, while more younger workers are paying into pensions under automatic enrolment, these workplace pensions are less generous than for previous generations.

The ability to increase wealth, for the lowest wealth households, has worsened in the latest year.

The slowing of movement between wealth bands seen in 2010/12 has continued into 2012/14. In 2012/14, around half of households remained in the same wealth decile, and, of those that did move, more moved down wealth deciles than up. As this analysis underlines, households with the lowest wealth are least likely to increase their wealth. These households with few resources do not have the capacity to build up wealth - indeed they are likely to have no or negative financial wealth, to have little savings, and are more likely to have arrears on household bills.

For the least wealthy households, this can mean a lifetime of low wealth, despite being in employment. In the medium term, this can mean little or no financial resilience to be able to cope with shocks. In the long term, low income and low wealth can mean poverty and low wealth continuing into pensioner years.

Next steps

This analysis will be updated for the period 2014/16, following the release of the next wave of WAS data in December 2017.