The Office For National Statistics (ONS) has today revealed its estimates of household incomes and inequality in the UK for the financial year ending 2021.
For the financial year 2021, median income of the poorest fifth of people fell by an average of 2%, while the richest fifth of people fell by 1%.
Disposable income inequality fell slightly to 34.4% in the financial year ending (FYE) 2021 from 35.4% in FYE 2020; however, this difference was not statistically significant.
This follows a relatively stable ten-year period leading up to FYE 2021 (FYE 2012 to FYE 2021), where income inequality derived from disposable income increased by an average of only 0.07 percentage points per year.
Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “The ONS’s figures show that wealth inequality was a deep-rooted issue in the UK before the full force of the Covid-19 disruptions took hold. The pandemic exacerbated matters, with lower earners more likely to raid their savings pots than higher earners to pay their bills as jobs dried up and costs, for instance, for childcare and health care went up. But the furlough scheme and other Covid support measures have helped matters.
“However, there was a wide range of outcomes for UK households during the pandemic: some experienced a dramatic fall in income because of reduction in working hours or job losses; and some experienced the opposite and found themselves with more disposable income as the Covid lockdowns led to a reduction in spending on things like travelling to work.
“The figures come at a time of particular concern about household budgets amid the escalating cost of living. With the dust seemingly settling from the pandemic, prices have rocketed at their fastest rate in three decades – meaning that we are all paying more to heat our homes, to eat and to travel.
“When prices are on the rise, it is important to reassess your spending habits to get a better idea of the goods and services that are eating most into your and make the necessary adjustments to your current plan. If you don’t have a budget, now is a good time to start – and stick with it.”