Lottery balls

Lifestyles of the rich and the famous… or is it?

26, 27, 46, 47, 52 and 58 proved to be particularly lucky for some at the beginning of 2016. Two lucky winners are set to share the record Lotto jackpot of £66,070,646. Individually they have become the Lotto’s biggest ever winners, each collecting £33,035,323. With a fortune to rival successful sports personalities, entrepreneurs and musicians, advice is often sought from the private arms of high street banks that regularly deal with high net worth individuals and assist them in managing this life changing sum. But lottery winners aside, what exactly qualifies as a high net worth individual?

Facts and figures

The latest figures show that the UK is home to 715,000 millionaires, more than in any other European country and the number is expected to increase over the next few years. The ‘league tables’ look at the financial wealth, rather than total wealth of an individual. The main family home will be excluded. The figures are in dollars rather than sterling so to qualify, you actually need £600,000 in addition to your home, not £1m in total. This would qualify you as a high net worth (or HNW) individual according to the press but the figures are different when it comes to legal protections. 

Opting out

Practically speaking, if you are a HNW individual, this can allow you to agree to a reduction in regulatory protection, as there is an appreciation that HNW individuals may be knowingly involved in riskier investments. As well as opting out of legal protections as borrowers under loan documentation, HNW consumers can also choose to opt-out of protections, for example, under credit or consumer hire agreements.

The effect of the exemption is that, amongst other things, the lender or lessor does not need to comply with all of the requirements of the Consumer Credit Act, particularly those which specify the form that a regulated agreement must take[1].

How high is high net worth?

The exemptions for HNW borrowers and hirers are set out in statutory regulation and guidance[2]. The two most important conditions of the exemptions are that:

  • there must be a declaration made by the borrower or hirer, which provides that the borrower or hirer agrees to forgo the protection and remedies that would be available to them if the agreement were a regulated credit agreement or a regulated consumer hire agreement. There’s a standard form that the declaration must comply with; and
  • there must be a statement (the HNW Statement) relating to the income or assets of the borrower or hirer which, confirms they have received during the previous financial year net income totalling an amount of not less than £150,000; and/or had throughout that year net assets with a total value of not less than £500,000[3]. 

FCA consultation

Currently the HNW Statement can be made by someone regulated by one of a short list of pre-approved bodies, such as the Institute of Chartered Accountants in England & Wales.  The FCA is proposing to add the Association of International Accountants (AIA) to the list of professional bodies who can provide the HNW Statement. Interestingly, the AIA is registered in the UK but has a global membership base, with the aim of promoting international accounting. Through adding it to the list the FCA hope to increase the range of options for individuals and firms (particularly those based overseas) and offer them the opportunity to work with a globally recognised firm, providing flexible advice to the dealings of the financial affairs of HNW individuals, in whatever location they need.

So with a new winner finally found (who apparently did not have a washing machine mishap), there’s one more entering the high net worth club this week.

For more information, email

[1] Consumer Credit Act  1974

[2] Financial Services and Markets Act 2000 (Regulated Activities) Order 2001  (SI 2001/544) (RAO) (articles 60H and 60Q) and the Consumer Credit Sourcebook (CONC)

[3] The Consumer Credit Sourcebook, App 1.4.3R, 1.4.4R and 1.4.7R

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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.