Swiss residents are still the wealthiest people in the world on a per capita basis but they also have the highest per capita personal debt in the world. Ireland gets a 19th rank for net financial assets just behind the German per capita level.

 

€136tn is a vast amount of money is how much personal financial assets across the globe were worth at the end of 2014. In theory, it would be enough for private households to settle all of the world‘s sovereign debt roughly three times over.

Allianz, the German financial services giant on Tuesday launched the sixth edition of its Global Wealth Report, which focuses on the asset and debt situation of private households in more than 50 countries under the microscope. Based on the findings of the report, three first-time milestones in financial asset development were passed in 2014: The global net financial assets of private households surpassed the €100tn mark, China’s private financial assets exceeded those of Japan, and the number of people falling into the wealth middle class in global terms breached the 1bn level.

Across the globe, the gross financial assets of private households in 2014 were up by 7.1% on a year earlier. This means that the robust growth witnessed in previous years continued, albeit to a lesser extent, not least thanks to households moving up a gear with their savings efforts. All three asset classes - bank deposits, securities and insurance and pension funds - contributed equally to growth. This brought total global assets up to a new record high of €135.7tn. This amount is higher than the value of all of the world‘s listed companies and all sovereign debt.

The global liabilities of private households climbed by 4.3% to total €35.2tn last year, bringing global debt growth up to the highest level seen since the outbreak of the crisis.

Allianz says debt growth was much lower in the countries bordering Switzerland, namely Germany (+1.3%), France (+1.2%) and Austria (+0.8%); in its neighboring country to the south, Italy, liabilities actually dropped slightly (-0.3%). Central banks in the other southern European states (Greece (-2.3%), Portugal (-3.1%) and Spain (-3.6%)) also reported a downward trend compared with 2013. Irish households continued with their consolidation strategy last year, slashing their liabilities by a further 5.5%. Since touching on a record high in 2008, private debt in Ireland has fallen by a good fifth.

Wealth, debt burden, Europe worldThe net financial assets per Swiss resident averaged €157,450 (CHF171,600) in 2014 — a 5.6% increase on the previous year. Irish financial assets rose 7.8% to €43,030, behind Germany's €44,770.

Swedish households lead the field in 2014 in Europe with savings swelling by 13.5%, closely followed by the UK and the Netherlands, which reported growth of 13.1% and 12.3% respectively — largely thanks to the marked increase in receivables from insurers and pension institutions. The rate of growth in the asset base also outperformed the western European average in Denmark (+8.5%)and Norway (+7.5%). Swiss households saw growth to the tune of 5.6%, slightly below the regional average but just ahead of the growth rate seen in 2013 (+5.0%). In Germany, the region‘s most populous county, the rate of change remained constant year-on-year at 4.2%, while asset growth in France dipped from 4.6% to 2.9%. The rates of growth in Italy (+2.6%), Finland (+2.6%) and Austria (+2.5%) were subdued; savers in these countries were helped by low inflation rates, which at least prevented any losses in real terms.

Allianz said that the direct impact of the ECB’s low interest rate policy on income in the form of lost interest income and reduced interest payments on loans differs from country to country. All in all, Euro Area households benefited handsomely: for the six years from 2010 to 2015, the "interest rate gains" add up to €130bn (1.4% of GDP) or around €400 per capita. The biggest winners are the southern Europeans such as Portugal, Greece or Spain: In all these countries, gains exceeded €1,200 per capita, in Portugal and Greece these gains equal 12% of GDP, in Spain 6%. and 3% in Ireland. On the other hand, Germany (with Belgium and Slovakia) is among the losers, "interest rate losses" add up to just under €30bn (1.1% of GDP) or around €367 per capita. However, these calculations do not take monetary policy effects on other assets classes into account.

Savers gained in Southern Europe in particular but at the expense of borrowers as rates were kept high until this year's ECB bond-buying program.

The main driving force behind the rising trend in Asia "was the stark increase in securities assets of 27%, particularly in China."

The asset portfolios of private households were dominated by bank deposits (38.2%) and receivables from insurance companies and pension institutions (32.5%). They invested 26.1% of their savings in securities (shares + bonds), a much smaller proportion than that invested by non-profit institutions serving households (41.1%). The latter held just under half of their financial assets (48.8%) in bank deposits, with the rest attributable to other receivables (10.1%); the ”insurance and pensions” asset class is the sole reserve of private households.

The Euro Stoxx 50 virtually stagnated as against 2013 (+1.2%) and even Germany‘s share index, the DAX, closed the stock market year having gained only 2.7%. In general, the European stock markets returned much poorer performance than their counterparts in the US and Japan, sometimes considerably so. The S&P 500, for example, gained 11.4% in the course of the year, with the Japanese Nikkei still rising by 7.1% after reporting a record increase of 56.7% in 2013. At global level, securities assets expanded by 7.5% last year, with the bulk of the growth momentum coming from Asia.

Shanghai stock exchange rose around 53% last year alone; assets held in securities, which account for around 40% of household portfolios, grew by more than 36% — 2015 will tell a different story!

The share of the global asset portfolio that was attributable to securities remained stable in a year-on-year comparison at just under 39%. Due to the previous losses induced by the crisis and the resulting tendency to flee towards supposedly low-risk investments, this proportion was still three percentage points down on the 2007 level.

Allianz said Western Europe and North America were virtually neck-and-neck in the growth stakes, with an increase of 4.8% and 4.4% respectively, while Oceania‘s securities assets increased by 5.7%. In western Europe , the growth was attributable to value gains alone — especially on bonds — with the asset class witnessing around €100bn in cash outflows on balance.

Wealth, shares, QE, Europe, Ireland

Top 20 in 2014 by… 

...net per capita financial assets

 in EURy-o-y in %rank 2000
#1 Switzerland 157,450 5.7 1
#2 USA 138,710 4.2 2
#3 UK 86,230 16.9 4
#4 Belgium 84,770 3.1 3
#5 Sweden 82,930 16.9 12
#6 Netherlands 78,060 21.3 8
#7 Canada 76,510 9.7 7
#8 Japan 73,550 3.5 5
#9 Singapore 73,330 4.9 14
#10 Taiwan 72,640 7.6 17
#11 Denmark 72,310 16.3 11
#12 New Zealand 65,650 3.6 10
#13 Israel 58,910 11.4 13
#14 Australia 53,800 8.2 19
#15 France 50,770 3.1 9
#16 Italy 49,420 3.4 6
#17 Austria 48,420 2.9 16
#18 Germany 44,770 5.2 18
#19 Ireland 43,030 20.7 15
#20 Finland 25,060 1.4 21

Inequality in Ireland and elsewhere battle between rich and well-off

US$7.6tn hidden in tax havens - almost half annual US GDP

Irish standard of living per inhabitant at 23rd of 34 richest nations

Low pay in Ireland; Lowest social security & corporate taxes in Europe

According to the OECD in 2014, in the developed world using "low-paying" as jobs that earn less than two-thirds of a country's median income, on average, around 16% of jobs in OECD countries are considered low-paying.

The ratio in the US is 25%; Ireland is at 22% and the UK is at 21% — low pay does not include low private sector occupational pensions coverage.