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Wealth Management 2005 from
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Thanks a million
" By Andrew Buchanan
Coutts Channel Islands
A million pounds is no longer enough to lead a ‘millionaire lifestyle’ according to a new study from Coutts. According to the findings, the term ‘millionaire’ – for those in possession of cash or assets totalling £1million – is now less meaningful.
This is due to the fact that the actual value of £1 million has fallen so dramatically over the last 25 years that it no longer affords the luxurious standard of living it once did. In fact, according to the study, the average ‘millionaire’ family would now need assets and wealth totalling at least £2.6 million in order to afford Coutts’s definition of the dream ‘millionaire lifestyle’ in the UK, suggesting that yesterday’s millionaires today really need to be thrillionaires!
Despite this, the study, undertaken on behalf of Coutts by research organisation BDRC, reveals that two thirds (65%) of the population would still give up their jobs immediately if they won £1million. But they might be in for a surprise, as £1million is no longer enough to fund the ‘dream millionaire’s lifestyle’ – with all the usual trappings of luxury, such as a five-bedroom house, personal household staff, luxury cars, an apartment and yacht abroad and luxury holidays each year.
As the number of millionaires in the country rises rapidly – over the last five years, it has increased more than 80% from 230,000 to 425,000 – the real worth of £1 million continues to fall. In the last 15 years alone, the overall value of £1 million has decreased by a third. At the beginning of the 1980s, £1 million was worth £2.83 million in today’s money – nearly three times as much as it is now.
Andrew Buchanan, Senior Executive Channel Islands, commented: ‘A millionaire used to be someone who was seen as super-wealthy – a person who didn’t have to work if they chose not to, and who was able to live a life of luxury simply by having £1 million in cash or assets. £1 million is obviously still a sizeable amount of money, which, if invested correctly, can afford a high standard of living and provide financial security in later life. While 25 years ago £1 million would have been more than enough to comfortably live the ‘millionaire’s lifestyle’ a few times over, today it will only afford a small portion of the trappings required. In this sense our research says it is time to coin a new expression: the ‘thrillionaire’ – as people now really need an average of nearly £3 million to be able to live that luxury lifestyle.
‘The fact that so many respondents felt that they may one day become millionaires is indicative of the entrepreneurial spirit of the UK and people’s desire to create their own wealth. Indeed, we have recently seen a significant shift in the profile of Coutts clients, where there are more self-made millionaires seeking our advice than ever before – entrepreneurs now represent the fastest growing area of our business.’
In 1980, interest rates were around 16% and property was worth one eighth of today’s values. Therefore, in London, the most expensive region in the UK, somebody could have given up work to live the ‘millionaire lifestyle’ with total assets of around £451,000. The same package today would require total assets of around £3.48 million. There are of course regional variations and retiring to live as a ‘millionaire’ in the north east costs around 60% of the assets required in London. However this is still in excess of £2.6 million.
Coutts also estimates that an individual who continues to work while maintaining this lifestyle would still need an income of between £200,000 and £300,000, in addition to having £872,000 worth of assets. Again, as expected, it costs most in London, where they would need £1.32 million in assets and a further £298,000 in income, and least in Wales and the north east (£720,000 in assets and £218,000 income).
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