The gap between rich and poor in the UK is growing, as savings and home ownership decline among the poorest families but rise among the richest, a report by insurer Aviva shows.
In a sign of growing financial strain, low-income families had just £95 of savings and investments, excluding pensions, this winter, compared with £136 in the same period last year. That figure jumps to £62,885 among high-income families, up from £50,208 a year earlier.
It means the savings gap between the richest and poorest has grown by 25% over the past year, from £50,072 to £62,790.
“The gulf between low- and high-income families is showing signs of widening, in a worrying indication that those less fortunate are finding their finances increasingly stretched,” said Paul Brencher of Aviva UK.
“While high income families have been able to increase their savings pots, those with low incomes have seen theirs fall to less than £100.”
One in four families in the UK are classed as low income, according to Aviva, with net monthly earnings below £1,500. Less than one in 10 (8%) fall under the high income classification of net monthly earnings of £5,001 or more.
Across all families, savings fell to the lowest level in 18 months. Home ownership in the UK was at the lowest level in four years, at 64% of families. Low-income families were the least likely to own their homes at 41% – down from 43%. Home ownership rose among high-income families to 90% from 88%.
Aviva said declining rates of home ownership could be a sign of difficulties getting a mortgage for first-time buyers or families not considered “prime” borrowers.
Brencher said: “Although mortgage rates are at record lows, qualifying for these deals and getting a deposit can be difficult for those with limited household income or unusual circumstances. Britain’s broken housing market means becoming a homeowner is a distant dream for many families and government plans must swiftly be turned into action to stem the tide of inequality.”
Inflation was a growing concern among families, with 43% saying that significant increases in the price of basic necessities was one of the biggest threats to their standard of living in the next three months, up from 36% last summer.
Economists have warned that households will come under increased pressure in 2017, as inflation rises while wage growth remains weak. The headline rate of annual inflation rose to 1.8% in January from 1.6% in December, the highest in more than two years. It is expected to rise to about 3% early next year, as the sharp fall in the pound since the Brexit vote pushes up the price of goods imported from overseas.
Brencher said: “With inflation climbing fast, families are understandably concerned about the impact of rising prices on the household purse. Poor returns on savings and rising inflation means families could well see their safety net eroded if they don’t keep up regular contributions and try to boost savings pots whenever possible.”
Average debt, tracked by Aviva since 2011, has now surpassed its previous peak of £14,950 in the summer of 2013 to reach £17,630 in winter 2016-17. Personal loans are the single biggest contributor to household debt, with families owing an average of £2,770.