Brits have £1trn more wealth in pensions than property

London is the only place in the UK which recorded the opposite trend

Brits currently have around £6.45trn ($8.77trn, €7.73trn) of private wealth held in pensions, compared with £5.46trn of property wealth, research by insurer NFU Mutual found.

Pension wealth has increased by nearly £3trn over the past decade and it currently makes up 42% of household wealth in Britain, compared to 36% in property.

Between 2010 and 2012, the amount of wealth between the two was roughly the same at £3.53trn. But since then, wealth in both occupational and private pensions increased by £3trn, while property only recorded a rise of just under £2trn.

Sean McCann, financial planner at NFU Mutual, said: “Pensions are often the most valuable asset a person owns, and in many cases worth more than their home. Most people have a rough idea of the value of their house, but many would be less confident in estimating the value of their pensions.

“Many invest in a series of pensions throughout their working life, and as a result have a fragmented picture of their pension wealth. A financial adviser can help you trace any ‘missing’ pensions and pull together a summary of your pension wealth to help you plan for retirement.”

Regional and age gaps

In most of Britain, pensions were the most valuable assets between 2018 and 2020, and represented over half of total household wealth in Scotland, Wales and the north east of England.

But in London the most valuable asset was property, totalling £1.11trn, and making up 49% of household wealth.

In comparison, pensions in the English capital were worth £682bn and comprised just 30% of household wealth, the lowest percentage in the whole of Britain, NFU Mutual said.

The vast majority of pension wealth was concentrated in active occupational defined benefit (DB) schemes in 2018-2020 which accounted for £1.88trn, compared with just £499bn in active defined contribution (DC) schemes.

Additionally, nearly £2.8trn of wealth was in pensions already in payment, and £1.27trn in preserved pension wealth.

As DB schemes slowly disappear from the market and DC pensions take over, this could arguably provide a picture of the generational divide in retirement wealth across the UK, where older people benefit from more generous pensions than younger generations.

Interestingly, International Adviser recently reported that younger people intend to tap into their properties to fund retirement, with 22% of workers already planning on doing so, according to Legal & General Home Finance.

McCann added: “A large portion of Britain’s pension wealth is held in DB schemes which guarantee a certain level of income based on salary. Many people who hold this type of scheme don’t realise how valuable they are.

“Auto-enrolment has increased the number of people saving into DC schemes, which build up a pot over time that will later fund their retirement. Speaking to a financial adviser can help determine how much you should be investing to fund your later life plans.”

Source: IA