10% of British households are millionaires

According to a report out last week, one in 10 British households has assets of over £1m. Looking at the graph, it seems that around twice that many, 1 in 5, are US dollar millionaires (i.e. £664,000+). And that’s net assets, after deducting mortgage debt etc, but including pension funds.

Just goes to show how crazy property prices have become.

I guess being a millionaire isn’t much to aspire to any more.

It seems weird at first but crunching the numbers it makes complete sense. I’m in the US but I am not in the top 10% of income. While I don’t have a million, if I had a spouse who made the same income as me and also had experienced surge of property values, I’d have a million in my household too.

Oh, British Pounds. I wouldn’t even have close to a million there. But I still have a few decades of work left in theory. In actuality, I’d retire long before I got to a $1.5 million.

Just so I understand, that survey is counting the present value of pension benefits not yet received, right?

I read it that way to. Big deal. If I collect on my pension (after I finally retire) for 15 years it will total over a million too.

Hey, if I live to be 200, I can be really rich!

It’s an idiotic and meaningless survey.

I believe it includes the cash value of pension funds, which obviously doesn’t bear much relation to how much they actually pay out when the time comes.

There are plenty of surveys showing that large numbers of people in the UK have next to nothing in their pension funds. I read somewhere that the average fund at retirement is only about £70,000, which will just about buy you a packet of biscuits and a box of teabags per week.

So I don’t think pension funds are making up the bulk of that million, somehow. It’s more to do with the fact that £1,000,000 now represents an extremely average three-bedroom house (link chosen pretty much at random) in most parts of London.

I’m in my mid-30s and it appears I already have more in my pension pot than the average 50-year-old. Which is some scant consolation for the fact that excluding that, my net worth (mortgage equity minus debt) is just about zero!

These figures must also include the potential value of government pensions like Social Security and its UK counterpart. You don’t usually count those among your assets, but if you think of the amount you would need to have in securities or other assets to realize the same amount of income you can (still hopefully) anticipate down the line, it would be a very significant chunk of capital. This is especially true for those who spend most of their working lives in situations where your 6% FICA* tax is mandated and matched by the employer.
*I believe it’s the FICA tax that I’m alluding to.

It’s the actuarial present value, not the expected payout. In other words, it’s what your employer would pay you today if you wanted to cash out your pension rights.

Am I misinterpreting this? Because where I’m from, especially 5 years ago, many people would have negative income if you included mortgage debt!

FICA is 7.65%, 15.3% if you are including the employer contribution.

If you consider just Social Security, it’s 6.2% (above figure is this plus 1.45% Medicare). x2 for each if you want to see employer. Also, all income above $113,700 is exempt for Social Security only.

And if you’re self employed, you have to pay both halves. You get a deduction for that, but it’s not the same.

And the report said there was a smallish percentage of people with negative net worth, yes.

But pretty much anyone who bought a house before about 2000, especially in London, has seen the value climb astronomically. Plenty of people have become “millionaires” without having to do anything.

Of course, it’s pretty pointless having a million pounds of equity in your house if all the other houses you want to buy have gone up by the same amount. You’re no better off, in fact you’re worse off because you now have to pay more stamp duty etc when you do move. If you want to downsize, though, the gaps between the gaps between the rings of the housing ladder have stretched out so you can probably cash in.

For first time buyers, though, it’s a nightmare. Nobody has a hope of buying a half decent house in London without at least £50k in savings as well as a good salary.