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.
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 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, who commissioned the research, 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 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 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 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 and saving or investing came higher. Other uses included setting up a trust, starting a business, and using it to retire early.
According to the report, The Generation Game, four out of five beneficiaries of inheritance expect to receive money, while just over half assume they will receive fixed assets of some kind. A further 16 per cent say they expect to inherit a business that their family member owner or part-owned, and a similar number say they will be receiving the heirlooms of significant monetary value.
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.”