The news out today from AT Kearney that most people didn’t lose much in the stock market crash according to a new study is obviously good. The bad news is that it’s because most of us didn’t have much wealth to lose in the first place.
“The global financial crisis triggered a barrage of dramatic headlines about ‘$30tn in market value wiped out’ and ‘millions set to suffer as financial crisis ravages retirement nest eggs’ ,” says Neil Dennington, a principal at AT Kearney the global management consulting firm. “But the actual impact on household wealth was much lower than the stock market losses, especially since equity markets have started to recover.”
The real story is more about how little people have in savings in the first place. The analysis from AT Kearney show that 90 per cent of UK households have an average of £7,000 in financial assets, including their defined contribution pensions.
The average financial wealth of the Baby Boomers in this group – those aged 45-64 – is less than £12,000. The problem, says Dennington, is that if you used £12k to buy an annuity tomorrow, it would give you a retirement income of about £15 a week.
According to the study, UK households’ wealth fell ‘only’ 13 per cent while the stock market dropped 43 per cent from its August 2007 peak to its February 2009 trough.
Part of the problem seems to be that the average cost of living in the UK, like many countries, is higher than the average income. People just don’t have enough left over after expenses to save properly.
Lucy Warwick-Ching
Matthew Vincent
Alice Ross
Ellen Kelleher
Steve Lodge
Josephine Cumbo
Tanya Powley
Jonathan Eley