Rich in cash, poor in psyche

The recession has knocked the confidence – but not the cash reserves – of Britain’s Working Wealthy, according to a study released today by specialist insurer Hiscox.

The recession has left its mark on the psyche of the Working Wealthy with a lack of confidence impacting their perceptions of wealth and appetite for risk. Whilst two in five (41%) say the recession has not had an impact on the amount of money they have to spend, almost an equal number (44%) say they are fearful of the future and have been steadily stockpiling cash.

Three in ten (30%) are taking less risks financially compared to pre-recession and a similar number (26%) admit they are actually taking less risks in all areas of their lives.
As a result, the Working Wealthy have made cutbacks across the board – spending on socialising and restaurants has been slashed by 49% of them, as well as holidays (41%), weekend breaks (43%) and home décor (38%). In fact, one in three (30%) are spending more in discount stores.
Nearly a quarter (24%) have not been directly affected by the recession but feel they need to behave differently anyway. Furthermore, when they are spending, over a quarter (28%) say they are less conspicuous because they know people that are struggling financially.

Rich redefined

Despite owning valuable art (10%) and jewellery (11%), having savings of more than £25,000 (26%) and going on two or more overseas holidays a year (25%), the Working Wealthy believe that to feel truly rich in 2009, they would require an average household income of £152,865****, as well as:
• Owning more than one property (35%), or a holiday home (27%)
• More than £20,000 per year disposable income (48%)
• Being mortgage free (31%)
• Driving a luxury car such as a Ferrari (26%)
• Owning original pieces of art (13%)

Looking after what’s important

While they may not consider themselves to be rich, the majority (68%) of the Working Wealthy believe it is very important to be happy with what they do have, with many citing family (85%), health and well being (80%) and new life experiences (22%) as top priorities. For those questioned, 60% class their home and 11% class their possessions as very important, which comes as no surprise considering the amount of investment made – according to Hiscox data, the average Working Wealthy household says they own over £88,000 worth of household goods and £11,000 worth of valuables such as jewellery and watches*****.

Steve Langan, managing director, Hiscox UK, says: “The report shows that whilst the economic downturn may have left the wallets of many of the Working Wealthy intact, they have suffered a crisis of confidence and have scaled back their spending and exposure to risk.

“However, it’s more important than ever for the Working Wealthy to keep stock of what they do have and understand their affluence. Because they don’t feel well-off, it is all too easy to underestimate the value of what they do have. This means there is a real danger of them not making enough provision to protect themselves and their possessions which they hold dear – an interesting paradox given that many feel that they are taking less risk generally.”
The Hiscox Wealth Review 2009 also reveals:
• Over half (56%) think they will have to work past retirement age because of the recession
• More than one in five (22%) say the reduction in interest rates means their household now has more disposable income
The Working Wealthy Regional ‘Rich’ List:
Region Average annual household income needed to feel ‘rich’
North East £178,238
London £177,704
Northern Ireland £172,781
South East £163,296
East Midlands £155,297
Wales £152,677
West Midlands £151,341
East of England £146,322
Scotland £144,873
North West £136,047
Yorkshire & Humberside £131,409
South West £128,912

Author: Tony Gibbs | December 7th, 2009

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Tony Gibbs
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