This brief post explores the average amounts in savings for UK households by age groups. It also looks at the average amounts in UK pension accounts, and the overall net worth of UK households by age.
I’ve included links to the source data, and included my own highlights below each chart.
All data is taken from the Office of National Statistics (ONS).
For household data, I’ve omitted the 16-24 age group, as those under 25 had their data skewed by those living with parents, resulting in very high household wealth.
Average UK savings by age
Source: ONS. Savings include the values of any financial assets held including both formal investments, such as bank or building society current or saving accounts, investment vehicles such as Individual Savings Accounts, endowments, stocks and shares, and informal savings. Net financial wealth relates to net financial wealth for the household. Therefore charts show individuals of any age living within households of this wealth.
- 24% of 25-34 year olds are over £5,000 in debt – likely the result of student loans
- At least 25% of those under 54 (dependent on age group) either have no savings, or are in debt
Employee pension contributions by age
- 75% of employees contribute 5% or less to their pension, regardless of age group
- Over 50% of employees across all age groups contribute between 3% and 5%
- Contributing over 7% to your pension would put you in the top 12% of employees across all age groups
Employer pension contributions by age
Source: ONS. These stats are employer-specific rather than dependent on individuals’ saving behaviour.
- Over 50% of UK employees have 1%-4% contributed to their pension by their employer
- Only around 40% of UK employers contribute more than 4% to their employees’ pension schemes
- 25% of employers contribute over 8%
Total combined contribution by age
- An employee with over 8% total contributions to their pension would be in the top 50% of their age group, regardless of age
- An employee with over 14% total contributions would put them in the top 20%
Average UK pension size for pensions not yet in payment
Source: ONS. Figures represent the value of any pension pots already accrued that are not state basic retirement or state earning related. This includes occupational pensions, personal pensions, retained rights in previous pensions and pensions in payment. Values exclude those with zero occupational pension wealth. Self-employed are excluded from these figures.
- A 35-44 year old with a pension size over £95,100 would put them in the top quartile of households for their age group
- To remain in the top quartile of the next age bracket would require more than doubling the pension size to over £237,400. This age group looks to be the main point where pension saving increases in preparation for retirement.
- The median pension size for someone approaching retirement is £91,200. This seems incredibly low. Given a 4% withdrawal rate as a rule of thumb, that equates to just £3,600 per year. Obviously retirees will have other sources of income (mainly state pension and property), but that’s still a low average pension size.
UK household net worth by age
Source: ONS. Total wealth is the sum of the four components of wealth and is therefore net of all liabilities: Property, financial, physical, private pension.
- 59% of those over 55 have a household net worth of over £500,000, which suggests that most people approaching retirement have much of their wealth in assets other than pensions, given the relatively low pension sizes for those in the same age group.
- 65% of those under 35 years old have a household net worth of under £200,000, yet the majority of those over 35 have a net worth over £200,000.
UK household net worth by wealth type
- Annoyingly this statistic isn’t broken down by age, but it’s interesting to see that property makes up roughly the same percentage of a UK household’s net worth as pension wealth.
- Given the relatively low pension sizes shown in the stats, it looks like many people are relying heavily on property to help fund retirement.
How long would you be able to make ends meet if you lost your main source of income?
- Contrary to most of the negative news around the savings/retirement crisis, I was surprised at how long most households could last after losing their main sources of income
- Again, this isn’t broken down by age, so is likely skewed by the older age groups with higher levels of savings
How would you find the money to meet an unexpected expense?
Source: ONS. A major expense is defined as an expense equivalent to your whole income for a month or more
- 65% of households could pay for an unexpected major expense out of their savings or investments. Again, this sounded encouragingly high, but is likely skewed by age.
- Having said that, 21% of people (over one in five) would have to borrow, sell something off, or simply couldn’t come up with the money if faced with an expense equal to one month’s income. That’s still a worryingly high number.
- Overall, the statistics on saving and investment in the UK are mixed.
- The average savings for UK investors I thought looked surprisingly low, with a high percentage of people, especially in the younger age brackets, either in debt or with no savings.
- The contributions by employees towards their pensions also seemed low, with 75% of employees contributing 5% or less to their pension. I imagine the majority of people only contribute the minimum required to take advantage of the employer match (usually 3-5%), but still the percentage seemed low given how tax efficient pensions are as a savings vehicle.
- Perhaps as a result of low pension contributions, the average UK pension sizes by age were also low, with the median pension size for someone approaching retirement being £91,200.
- However, the stats on household net worth were more encouraging. The stats showed that households held high proportions of their wealth in non-pension/savings accounts, such as property. 59% of those over 55 have a household net worth of over £500,000.
- Also encouraging were the responses to the questions around how long households could cope after losing their main source of income, and how they would deal with an unexpected major expense.
An obvious point, but still one worth making, is that personal finances are just that – personal. How much you should have saved, or invested, or in net worth is completely dependent on your own circumstances and goals.
Someone intending to retire at 35 and spend their retirement cruising the world on their superyacht, sipping Dom Pérignon and eating meals prepared by their personal chef is going to need more savings than Scrooge McDuck. As a result, that shouldn’t be the benchmark for someone intending to retire in their late 50s, who wants to travel occasionally, take up a hobby, and spend time with the grandkids.
The average amount in savings for UK investors is an interesting statistic to think about, but ultimately everyone’s financial situation is different. There’s little point comparing your own financial situation against the average, as nobody has an average situation.
Having said that, the fact you’re reading this blog means you’re highly likely to be in a better financial position than most, given that an interest in investing puts you ahead of 99% of the population.
For those looking to improve their financial situation, and who want to learn more about investing, this section on The Basics might prove to be a useful starting point. It covers topics such as Am I ready to invest?, How much do I need to start investing?, and How do I invest?.