Looking Beyond 2025, Financial Families in the UK Extended from Necessity could Exceed One Household in every 100
Dublin (PRWEB) September 27, 2005
Research and Markets (http://www. researchandmarkets. com/reports/c24668 (http://www. researchandmarkets. com/reports/c24668)) has announced the addition of Extended Financial Families Market Assessment 2005 to their offering
The concept of the `extended financial family' has been developed by Skipton Building Society. The extended financial family has the potential to provide social welfare and to save the Government money in the process. Middle-income groups — junior managers and professionals, small employers, the self-employed and skilled workers — are the most likely to need to pool resources to care for dependants and protect assets for the future. The problems include fragmented families that do not wish to co-operate, the inheritance taxation regime that penalises inter-generation transfers, a shortage of suitable housing with annexes and the lack of value that the Government — and society — places on unpaid work such as caring for dependants.
The Government faces a democratic trap. The elderly, who are rising in number, are far more likely to vote than the young, and the elderly want higher basic pensions. Yet no government can afford a significant rise in the basic pension without a painful rise in taxation, or unless it forces all those in their 60s to stay in work. The latter scenario depends on there being enough jobs available and on elderly workers being fit and having no caring responsibilities.
From age 50, income from wages and salaries falls off rapidly. From age 75, more than half of households' income is from social security benefits. If more households are to be financially viable in the future, a higher proportion of income will have to come from employment and self-employment after the age of 50. The most affluent 1% of adults own almost a quarter of all marketable assets, but the polarisation is even more striking when dwellings are excluded: there is almost nothing left for the least affluent half of the population.
UK households are spending vastly more than their income. The average gap in 2003/2004 was almost £22 a week. The situation was far worse for four in every five households. The overall average was improved by the large surpluses of the 10% of households with the highest earnings. The annual deficit was highest among the poorest 10% of households, but the annual deficit exceeded £2,500 between the fourth and the seventh deciles and was more than £2,000 in the eighth decile. The figures highlight the phenomenon of middle-income households who are being kept afloat financially by the value of the equity in their homes, and who are thus vulnerable to any downturn in the property market.
In 2005, the UK dependency ratio — the proportion of pensioners to those of working age between 20 and 64 — is 27%. By 2020, the ratio is likely to rise to 33% and in 2050 it could be 47%. Demographic pressures alone will force many middle-aged offspring either to look after their parents or to see them live in poverty. One possible outcome is a rise in neglect of the elderly.
The indebtedness of so many households means that it will be hard for them to amass enough savings to repay their mortgages and build up their pension funds. Multi-generation households, sharing expenditure, should develop quickly in the hard-pressed middle echelons of UK society, as they face debt, the costs of education, housing and retirement, and reduced inheritance expectations as the elderly use their capital to support themselves. Looking beyond 2025, financial families extended from necessity could exceed one household in every 100. If households' finances worsen considerably, this scenario could be a reality in 2015 or sooner.
For more information visit http://www. researchandmarkets. com/reports/c24668 (http://www. researchandmarkets. com/reports/c24668)
Laura Wood
Senior Manager
Research and Markets
Fax: +353 1 4100 980
###
