There are signs that financial confidence amongst the UK’s wealthiest constituents is starting to return following a marginal rise in the Saltus Wealth Index, the UK’s leading report into the views of High Net Worth Individuals (HNWIs).
Created by wealth manager Saltus, Censuswide and Dr Michael Peacey of the University of Bristol, the Saltus Wealth Index is calculated on the back of responses from more than 2,000 people with investable assets of more than £250,000 to nine key wealth-related questions.
The Index, built by Dr Peacey, aggregates a number of measures relating to respondents’ views concerning their own wealth and the wider UK economy, their feelings about the freedom – and anxiety – money can bring, their views on tax and, investments, as well as their concerns and UK political and geopolitical events, to create an overall ‘confidence’ score of between 0 and 100.
The Saltus Wealth Index currently stands at 60.9, which is a marginal increase on the last Index of 59.5 (measured in January 2023) but is still considerably lower than 67.7 recorded in May 2022.
This suggests that while respondents are generally positive – in fact, the Index shows a 4% rise in the number of HNWIs feeling optimistic about the UK economy (from 67% to 71%) – confidence is nowhere near as high as it could be.
Inflation and potential tax changes are top concerns
HNWIs remain worried about rising inflation, with 28% of respondents citing it as a significant issue, while fears about the impact of future tax changes are now much more pronounced than they were six months ago – more than a fifth (22%) of HNWIs say potential tax changes are a major concern compared with 17% in January.
This specific rise could be linked to the tight fiscal environment the current government is operating and the fact that Labour has pledged to reverse the pension reforms (scrapping the Lifetime Allowance and increasing the Annual Allowance) that has been welcomed by this group. Saltus’ research shows that 72% of respondents intend to take advantage of the changes.
The Index also shows HNWIs remain concerned about rising interest rates – specifically the impact higher rates are having – or will have – on their ability to pay their mortgage. Overall, 87% say rising rates either already have (37%) or will (50%) cause issues. As well as struggling with their own finances, a fifth of respondents have reduced their own pension contributions to provide financial support to family members.
A rise in anxiety about wealth
Given the ongoing concerns about inflation, tax changes and rising interest rates it is perhaps no surprise we have seen an increase in anxiety around money – the number of respondents who say their money makes them anxious has risen from 60% to 64%.
Michael Stimpson, Partner at Saltus said: “The Saltus Wealth Index has recovered from 59.5 to 60.9 but is still some way off the peak confidence we recorded 18 months ago.
“HNWI respondents are worried about inflation and interest rates. They are concerned about planning for the future as well as the challenges of having to support family members and dependants as economic pressures persist. The research reveals that while respondents believe that financial meltdown may have been averted, the people in our sample are by no means sanguine about the future.”
Dr Michael Peacey, Senior Lecturer in Economics at the University of Bristol added: “The very marginal increase in the Saltus Wealth Index suggests that although confidence among HNWIs remains resilient, despite the fact that the challenges to household finances have continued for the last six months, a recovery to the level of the first Index may take some time.
“It was apparent from the last Index that many HNWIs will have anticipated some of the challenges of the last six months – for example, inflation remaining high and interest rates rising consistently to a level not seen in over 15 years. However, the view that neither of these will fall as fast as some previously believed is restraining confidence.
“Although HNWIs may be insulated from the most severe impacts of the cost-of-living crisis, there is some commonality to the general themes of some challenges. For instance, those people in our sample who are being hit by rising mortgage rates, or have made sacrifices to support their children financially.
“This group does have some opportunities. While some investments have seen poor performance over the last six months, others have performed well over the same period. However, the current mix of challenges and opportunities mean that making appropriate decisions to protect their wealth will be especially important for many HNWIs, and so it is perhaps unsurprising that the only measure in the Index to fall significantly corresponds to the increased anxiety caused by money.”
