Why women and young people could hold more wealth in future

It’s taken an extra post-Covid year and several months of crunching data to get information out of Scotland’s 2022 census.

This is being released in batches. The picture so far, compared with 11 years before, tells us of a country that’s more populous, more diverse, less religious and we’re living more solitary lives. On average.

As ever, the census illustrates long-term trends in the way lives are changing. It reflects the way in which population is moving, changing identities and ageing.

The latest figures tell us more about housing. Some of it could have been anticipated.

We knew that there are many more students in Scotland, for whom the big cities have more and more accommodation blocks.

It showed a 68% rise in those in student accommodation, reaching 22,600. But more is needed, and more is being built. The number of students is putting pressure on the wider private rented sector.

The 2022 census also confirms a wider shift to private renting, as rising prices have made it hard for younger people to buy homes. Nearly one in eight households are renting privately.

Rents continue to rise at a faster pace than price inflation and than the price of a home, with landlords and developers saying the prospect of rent control legislation is making it harder to make the case for more investment for more provision.

One striking trend that emerges out of the latest release of figures is of the baby boomer generation, now at least 60 years of age, paying off mortgages and owning homes outright.

More than a third of all Scotland's homes are owned without a mortgage, according to the census results. That has more than doubled in 20 years, and the rise has been mostly among people aged 65 and over.

For them, mortgages have reached the end of their terms. Lockdown gave an opportunity for many to bring that point forward, and recent figures suggest the savings rate, which includes the paying off of debt, has risen.

This is clearly a signal of the concentration of wealth in older generations. In the US, baby boomers, born between 1945 and 1964, own more than half of its wealth.

It's also a reminder of what we can expect to follow in future decades. It’s known as the Great Wealth Transfer, and is being closely watched and anticipated by wealth managers.

The finance sector expects a significant shift towards women holding wealth. They tend to live longer. Once widowed, remaining in the same home, they then control that asset.

The next stage is the transfer of that wealth to a younger generation - some in gifts to help with house purchase, education or raising kids - a lot of it left as a legacy.

It's been estimated (in 2017) that the annual UK transfer of wealth across generations is nearly doubling from its trend rate to £115bn per year, and more than £5 trillion will transfer in the UK by 2055.

In the United States, one estimate is of a transfer of $84tn from older generations over the next two decades.

With two-thirds of British households being home owners, and with valuations varying widely, that disperses wealth to generations who have found it harder to make their way in the property market.

The growth of home ownership since the 1980s, with council house sales and easy access to mortgages, has spread wealth more evenly in Britain than in many similar countries, emphasising the country's obsession with bricks and mortar.

That is surely welcome, but the transfer within and across generations continues the spread of wealth in an uneven way.

The Great Wealth Transfer will not feel so great for some. Bigger families will see wealth dispersed. Only children will do best. Many will be handed down no wealth at all.

This raises questions about ways in which single women and younger generations can use their wealth differently - perhaps in more productive ways than holding property.

It also raises several issues of public policy: how much can and should government catch in its tax net during that transfer?

The new Labour government has already taken aim at methods used by those with clever wealth managers to avoid paying inheritance tax.

In its election promise not to increase tax on ‘working people’, that conspicuously fails to cover the deceased. That increases the incentive to maintain a large rainy day fund. Meanwhile, some hold on to wealth for fear of large care bills.

Until governments – at Westminster and Holyrood - settle on a sustainable and reliable policy for funding long-term care, they are making it less likely that dispersal to younger generations can be brought forward.