£400bn of wealth to be left by grandparents in their Wills

£400bn of wealth to be left by grandparents in their Wills main image

A recent news story in the Daily Mail says that a 'cascade of wealth' of more than £400billion is set to flow to younger generations from their grandparents’ Wills in the coming years.

Insurer Royal London carried out the study of 5,600 people to find out about their plans and expectations for receiving an inheritance and discovered that:

  • the value of a typical estate expected to be left is between £400,000 - £500,000;
  • the most likely recipients of this wealth are in the 45 to 64-year-old age bracket;
  • around half of grandparents plan to pass on their wealth directly to their grandchildren.

Parents concern for the younger generation

The survey also found that 40% of 45 to 64-year-olds feel under pressure to pass any inheritance they receive in a Will straight on to their own young adult children.

This is due to concerns over the financial position of the younger generation who have not generally seen their wealth increase in the same way that some people in the older generations have.

Inheritance and expectation

Attitudes to inheritance also differed sharply between the generations with:

  • 86% of those aged 25-44 wanting to see their grandparents ‘spend freely to enjoy their retirement’;
  • 56% of the over 75’s saying that they want to be able to ‘spend freely’ on themselves in retirement. 

While the study showed that generally, those in the 24-44 age bracket were not expecting an inheritance from a Will:

  • two in five had already received a lump sum from their grandparents;
  • just over half had received a lump sum from their parents, typically to help with a deposit on a home or to pay towards an event such as a wedding.

The data also highlighted how those aged 65+ were largely preserving their wealth, with very few opting to free up cash via equity release.

The report argues that government policies designed to help ‘generation rent’ need to focus more on those who will not benefit from inherited wealth. 

Summing up the findings, Steve Webb from Royal London said: “There is a wall of housing wealth set to cascade through the generations in the coming years.

“Grandparents still attach great importance to passing on their wealth rather than consuming it.

“Many in the next generation feel under considerable pressure to pass any inheritance straight on to their own children as they are acutely aware of the challenges faced by their millennial offspring.

“Those millennials lucky enough to have home-owning parents and grandparents may be set to benefit from significant inheritance which will help them on to the housing ladder. But the majority of are not in that position”.

He added that schemes such as the Lifetime ISA which provide a government contribution of £1,000 per year for those who have £4,000 per year to save tends to favour those who already have access to wealth and won’t be much help to struggling renters.

“There is a danger that this will reinforce the advantage of those who are set to benefit from a cascade of wealth from the older generations.”

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