Uneven distribution of wealth adding to debt troubles?

A number of people may be harbouring debt concerns because of an uneven distribution of wealth in the UK, a new study has suggested.

The Institute for Fiscal Studies (IFS) has found a large proportion of money resources are held by a relatively small proportion of the population.

It showed most families amassed very little liquid wealth between 2000 and 2005, while younger families and those on lower incomes had significantly low median rates of saving in these years.

The median level of such funds in 2005 was £1,100, with the 75th percentile standing at approximately £16,000 and the 90th percentile coming in at just under £60,000.

In this year, more than 60 per cent of households had liquid wealth that was worth less than a quarter of their annual earnings.

Holdings of wealth appeared to increase with age, with the exception of the very oldest groups of people.

Families with members over the age of 75 tended to have less money than those with slightly younger relatives.

The analysis, which was funded by the IFS Retirement Saving Consortium and used data from the British Household Panel Survey, based the findings on families – or benefit units – that consisted of a single adult or couple and their dependent children.

Cormac O’Dea, research economist at the IFS, noted: “Many families, in particular the youngest families and those on the lowest incomes, had very low rates of saving between 2000 and 2005.”

The Association of Investment Companies recently found university costs could be adding to debt worries, as the average student is expected to graduate owing fees in excess of £20,000.

By Joe Shervin