High-net-worth individuals increasingly expect a greater proportion of their total annual income to come from non-salary sources, such as carry distributions, bonuses, dividends and business sale proceeds, according to research released by Investec.
In the Investec survey, 85% of respondents say they expect a higher proportion of their total annual income to come from non-salary sources in future, including 64% who expect that proportion to rise slightly and 21% who expect it to rise significantly. Only 15% do not expect the proportion of income from non-salary sources to increase.
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That expectation appears to reflect a trend already in motion. Over the past three years, 50% say the level of income they receive from non-salary sources has increased, including 39% who say it has increased slightly and 11% who say it has increased dramatically. 40% say it has stayed the same, while 10% say it has decreased.
Separately, 89% of respondents say they expect their total annual income to be higher this year than last year. This includes 63% who expect it to be significantly higher and 26% who expect it to be slightly higher. A further 11% expect income to stay about the same, while less than 1% expect it to decrease slightly.
Among those expecting higher total annual income, 63% say this is because they expect a significant increase in income from employment, including a bigger bonus. Meanwhile, 38% say they expect to receive additional variable pay, such as carry or proceeds from the sale of a business. A further 9% expect higher income from their own investments outside work. Respondents were able to select multiple factors they believed would contribute to an increase in their total annual income.
HNW income shift reflects more uneven income environment
Emily Cvijan, Private Banker, Investec Private Bank, said: “This shift reflects a more uneven income environment. As a greater share of earnings comes from non-salary sources such as carry, bonuses, dividends and business sale proceeds, income can become less predictable and more dependent on the timing of distributions, exits and other one-off events rather than regular salary cycles.
“That can make cashflow harder to manage, particularly when people are planning for significant purchases such as a home. That is why it is important to look at the full picture of someone’s earnings, assets and projected cash flows, so they can structure their lending and liquidity around irregular income.”
