Want to be a millionaire? You'll have to live in Hounslow rather than Kensington

The value of a £1m has been eroded by inflation and would have been worth £2.6m in 1992.

The value of £1m has been eroded by inflation and would have been worth £2.6m in 1992.

Over the past two decades, inflation has downgraded the lifestyle that £1 million can buy from extravagant to affluent and people's perception of the sum's value has changed significantly, according to new research from first direct.

In 1992, £1 million could buy a basket of goods including the average house in Kensington and Chelsea, a Rolls-Royce, a seagoing luxury yacht, and holiday homes in Tuscany and Cornwall whereas nowadays, it can buy the average house in Hounslow, an Aston Martin and a river cruiser.

Today, the cost of the 1992 basket has shot up by 163pc to £2,619,720. Over the same period, the average gross annual salary has increased by 100pc from £15,850 in 1992 to £31,606 today.

A decade ago, almost everyone (94pc) saw £1 million as a large or iconic sum of money, compared with 71pc now, a significant fall of 23pc. This is mirrored by 20pc of people saying that a win on the National Lottery would only be large if it was more than £1 million.

Of the 29pc of people who don't see £1 million as a large sum of money, almost half (44pc) only view sums above £5 million as large and 15pc only view a sum as large if it is over £10 million.

However, when looking at the more realistic financial situations that most people face, expectations are much less lofty. In the case of a retirement lump sum, 92pc said they would be happy with an amount lower than £1 million, as would 98pc of people for buying a house or receiving an inheritance.

People have the most modest expectations of a work related bonus, as 65pc would see less than £1,000 as a substantial sum of money to receive from this source, compared with just 19pc who said this of an inheritance and 11pc who say this of a lottery win.

Bruno Genovese, head of savings at First Direct said: "Over the past twenty years, the things that a million pounds can buy have become increasingly modest and our view of a million pounds as a sum of money has started to change it is still seen as a significant amount of money by most people but not by as many as it once was.

"Inflation and the fact a new millionaire is created almost every week with the National Lottery means some people now have a higher expectation of what constitutes a large sum of money.”