Are you richer than before the pandemic? It probably helped if you were well-off already | Business News

Did your household emerge from 2020 better or worse off?

If your answer was unfortunately the latter then you are probably in the minority.

For, while millions of people were put on furlough last year when the pandemic struck and some were unlucky enough to lose their jobs altogether, overall household wealth grew during the year.

According to the Office for National Statistics (ONS), household net worth grew by 8.4% in 2020 to a total of £11.2trn.

With the exception of 2014, it was the fastest annual rate of growth since the global financial crisis, while it was only very slightly below the pre-crisis average growth rate of 8.5%.

As a result, at the end of 2020, household wealth in the UK stood at an all-time high.

The ONS provides a number of reasons for the increase.

Two-fifths of it came from land, chiefly a result of a 7.3% rise in house prices, which the ONS says “was likely to have been affected by the reduction in stamp duty rates”.

Almost as significant a contributor to the rise in household wealth was a rise in the value of insurance and pension schemes.

The ONS says this was due mainly to a rise in the value of defined benefit – final salary in the jargon – pension schemes.

These, the ONS notes, became more valuable due to the fall in gilt (UK government IOU) yields.

Gilt yields are used to calculate the liabilities of a pension fund – in other words the future pay-outs it must make to retirees – and, when they fall, it increase the size of a fund’s liabilities.

Higher liabilities, in essence, mean the cost of future pension pay-outs to retirees rises, making the promise…