On 28 November 1990, Margaret Thatcher resigned — how have savings, investments, and house prices changed since?

On 28 November 1990, Margaret Thatcher resigned from office, marking the end of the longest stint of any prime minister in the 20th century.

Love her or hate her, the Iron Lady kept control of her government through a lengthy period of both economic and social turmoil.

In hindsight, the era seems stable compared to the current revolving door of politicians taking up the UK’s key political positions. As we approach the anniversary of her resignation after she served 11 years in office, we look back on a year in which the UK witnessed a prime minister last for only 50 days in the role.

In the 32 years since Thatcher resigned, the lives of average Britons have changed: socially, culturally, and financially.

Housing, savings, and investments in 1990 had just faced over a decade of similar issues to the markets today, as an energy crisis and international instability led to high levels of inflation. But exactly what did they look like back then for the average Briton and how have they changed since?

History can provide incredibly valuable lessons for your finances. The philosopher, George Santayana, famously said: “Those who cannot remember the past are condemned to repeat it”.

Read on for a summary of the key financial facts from 1990 and how they compare to life in 2022.

1. Savings today need to last longer than in 1990

It is important to consider that life was shorter in 1990 than it is today. It should also be noted that before the Pensions Act 1995, the State Pension was available earlier with women receiving it from age 60 and men at 65.

The gap between retirement and death has since grown, with Office for National Statistics (ONS) statistics showing that the average life expectancy for men and women in 1990 was 72.9 and 78.5 respectively. In comparison, in 2022 it is 79.5 for men and 83.2 for women.

The Guardian reports that a girl born this year has a 1 in 3 chance, and a boy 1 in 4, of reaching their 100th birthday. The article goes onto detail data from the ONS that predicts that by the year 2066, there will be more than 500,000 people in the UK aged 100 or over.

In basic terms, it means that in comparison to the present day and beyond, your savings in 1990 were unlikely to have needed to last as long upon retirement.

The UK’s ageing population is also likely to put further strain on public finances, and programmes like the State Pension, and increase the importance of having a sizeable private pension pot.

Inflation at the end of 1990 was 7.62% and the Bank of England’s (BoE) base rate was at 13.88%. According to the BoE’s inflation calculator if you had £100 in 1990, the cost of goods and services you could purchase with it today would now cost £221.56 when adjusted for 32 years of inflation.

Remember: inflation will inevitably erode the “real” value of your savings. It is vital that you take this into consideration when making plans for your eventual retirement.

2. Buying a house in 1990 was more affordable when compared to the average salary

The perils faced by millennials looking to get onto the property ladder has become a recurring meme in the era of social media. But as a generation tries to brush their troubles aside with almost gallows-like humour, saving for and purchasing a home remains a key life goal for most Britons.

Britons in the early 90s likely viewed the property market with a similar disdain, as rising interest rates contributed to a market crash and a sharp decline in property values across the UK. The country entered a recession, and the property market wouldn’t recover until the second half of the decade.

Data from the Land Registry shows that the average UK home was priced at £57,901 at the end of 1990 (or approximately £128,287 when adjusted for inflation today) and the average UK annual salary was £24,458 — meaning the average home cost approximately 2.37 times the average salary.

In 2022, the average house price sits at £295,903 (according to August 2022 Land Registry data) and the average annual salary is approximately £33,000, which means that the difference between average incomes and house prices has leapt to almost 9 times.

This is partially due to growth in the housing market over the past 32 years, but also because of wage stagnation. The average salary in 1990 would be worth approximately £54,190 today when adjusted for inflation.

The housing market may have dipped in the 90s, but it quickly bounced back, and prices rapidly escalated until the 2008 market crash. Since then, it has rebounded again, and prices have resumed their upwards trajectory. Although recent trends may see a short-term decline in property values once more.

3. UK stock markets were facing similar issues in 1990 as they are today

As the Thatcher years drew to a close, the UK economy was experiencing very similar circumstances to those occurring today. An energy crisis and social unrest in the late 70s and 80s had led to high inflation in the UK and a slowing of economic growth.

In the years preceding Thatcher, Britain relied heavily on its industrial backbone such as shipbuilders, car manufacturers, textile producers, as well as the steel and coal industries. Thatcher’s government oversaw large scale deindustrialisation and the makeup of the UK economy as she left office in 1990 involved a very different collection of companies.

The FTSE 100, the UK’s leading stock market index, was only six years old in 1990 and had marked a shift away from previous indices, like the FT 30, which were overly focused on British industries compared to the FTSE 100’s more international outlook.

In 1990, the FTSE 100 saw average returns of -11.52% for investors as the markets dipped. However, this isn’t necessarily indicative of the market’s performance over the intervening years.

The graph below shows the performance of the FTSE 100 over the 32 years since:

Source: London Stock Exchange

As you can see, while there have been periods of decline over the years, over the long term the market has grown in value.

IG reports that the median annual return for the FTSE 100 for any 10-year period between 1984 and 2019 was 8.43% with dividends reinvested.

The similarities between the markets of 1990 and today present a unique opportunity for investors to learn from the past and plan for the future in the knowledge that over the long term, markets typically recover.

Get in touch

Reviewing history can give us beneficial hindsight that can help guide future decisions. The similarities between Briton in 1990 and today are stark and could offer valuable insights into what may occur in the next few years.

However, before making any major financial decisions, you should discuss your plans with your financial planner. Get in touch with us at helpme@aspirellp.co.uk or call 0117 9303510.

Please note

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.

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