Almost two-thirds (64%) of 25-45 year olds expect to receive inheritance from their parents & grandparents, according to new report
But four in 10 (38%) set to receive a substantial windfall haven’t yet spoken to the person gifting their inheritance
Nearly a third (29%) expect to receive at least £50,000, with the average expected value £233,000
Almost a third (31%) of those expecting substantial inheritance admit to putting off saving and “living in the now” because they have the windfall coming
Similar number (34%) say they will be reliant on this inheritance for their financial security in future
Over 11 million people aged between 25-45 in the UK expect to receive some sort of inheritance from their parents or grandparents, with nearly half (5.1 million) of these expecting to inherit at least £50,000 in fixed assets or money. That is according to a new report by Sanlam UK that looks at the intergenerational wealth transfer expected to take place in the UK over the next 30 years.
The report, The Generation Game, comprises research of three different cohorts: over-55s with investable assets of £100,000 who are leaving their children and grandchildren inheritance; people aged between 25-45 who are expecting to receive at least £50,000 in inheritance; and 200 UK-based independent financial advisers.
The report finds that, of those 5.1 million likely to receive over £50k, the mean average value of the inheritance expected is £233,000, which would equate to £1.2 trillion. Interestingly, however, the report also suggests that four in 10 (38%) of those set to receive this inheritance haven’t yet spoken to the gifting party about their plans – suggesting that there could be a mismatch between their expectations and reality.
Sanlam UK CEO, Jonathan Polin, said: “Our report highlights the scale of intergenerational wealth transfer that the UK is set to see over the next few decades. This level of inheritance is unprecedented, and its transfer presents both opportunities and challenges for the financial services industry and society more generally. That it comes at a time of societal, political and economic upheaval simply adds another element of complexity and uncertainty to an already extraordinary picture.”
Despite the vast amount of wealth likely to be passed down between generations, the report nonetheless warns that those in line for inheritance could end up being over-reliant on their expected windfall. Almost a third (31%) of those 25-45 year olds surveyed for the report admit they are putting off saving and “living in the now” because they know they have the money coming later down the line. A similar number (34%) said they will be reliant on their inheritance to help with their finances in the future.
Perhaps reflective of their generation’s more financially precarious position, the report also finds an alarming number in this group will be relying on inheritance to pay off debt. Indeed, almost a quarter (24%) of respondents said this will be one of the main uses of their inheritance – the third most commonly cited use for inheritance. Only purchasing a property (34%) and saving or investing came higher (38%). Other uses included setting up a trust (23%), starting a business (15%), and using it to retire early (17%).
According to the report, The Generation Game, four out of five (81%) beneficiaries of inheritance expect to receive money, while just over half (51%) assume they will receive fixed assets of some kind. A further 16% say they expect to inherit a business that their family member owner or part-owned, and a similar number (15%) say they will be receiving the heirlooms of significant monetary value.
Jonathan Polin continued: “Clearly, the recipients of this wealth – many of whom straddle the line between millennials and generations Xers – are relying on their inheritance to act as a financial panacea. This is understandable in the context of rising debt levels, stagnant wage growth, and spiralling property costs, all of which have had a deleterious effect on disposable income.
“That said, overreliance on inheritance could be risky, especially if it affects the younger generation’s level of engagement with savings and investments today. As a first step, families need to have full and frank conversations about inheritance – this will help ensure younger generations have a realistic expectations of what they are to receive and can prepare accordingly.”
The figures in this release are taken from three separate sets of research undertaken for Sanlam UK in April 2018. These comprise:
An online survey carried out by Atomik research of 1,000 people aged between 25 and 45, who are expecting to receive inheritance of at least £50,000 (in fixed assets or money) from their parents and/or grandparents.
An online survey also carried out by Atomik research of 500 over-55s, with investable assets of £100k+, who are leaving an inheritance to their children or grandchildren.
An online survey of 200 IFAs carried out by Opinium.
In addition, more than 100 face-to-face interviews with intermediaries, lawyers, accountants and family offices were conducted by Sanlam UK and helped inform the content of the report.
NB: All statistics used, unless stated otherwise, are taken from these sources, and all mentions of under-45s and over-55s in this report refer to the aforementioned sample