Over the past 20 years, inflation has downgraded the lifestyle that £1 million can buy from extravagant to affluent. People’s perception of the sum’s value has changed significantly, according to new research from first direct.
In 1992, £1 million could buy a basket of goods including the average house in Kensington and Chelsea, a Rolls Royce, a seagoing luxury yacht, and holiday homes in Tuscany and Cornwall whereas nowadays, it can buy the average house in Hounslow, an Aston Martin and a river cruiser.
Today, the cost of the 1992 basket has risen by 163% to £2,619,720. Over the same period, the average gross annual salary has increased by 100% from £15,850 in 1992 to £31,606 today.
10 years ago, 94% saw £1 million as a large or iconic sum of money, compared with 71% now, a fall of 23%. In addition, 20% of people saying that a win on the National Lottery would only be large if it was over £1 million.
Of the 29% of people who don’t see £1 million as a large sum of money, 44% only view sums above £5 million as large and 15% only view a sum as large if it is over £10 million.
However, in the case of a retirement lump sum, 92% said they would be happy with an amount lower than £1 million, as would 98% of people for buying a house or receiving an inheritance.
Those surveyed have the most modest expectations of a work related bonus, as 65% would see less than £1,000 as a substantial sum of money to receive from this source, compared with just 19% who said this of an inheritance and 11% who say this of a lottery win.
“Over the past 20 years, the things that a million pounds can buy have become increasingly modest and our view of a million pounds as a sum of money has started to change – it is still seen as a significant amount of money by most people but not by as many as it once was,” said Bruno Genovese, head of savings at first direct.
“Inflation and the fact a new millionaire is created almost every week with the National Lottery means some people now have a higher expectation of what constitutes a large sum of money.
“However, most people can’t rely on a lottery win for their financial planning and, as the things they hope to buy increase in price, their best option lies in building up a savings pot. Even if it doesn’t make you an instant millionaire, it gives you financial stability, helps you to afford the things you want and, over time, might just help to pay for that sports car.”