RegulationDec 22 2015

Non-savers relying on inheritance to fund pension

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Non-savers relying on inheritance to fund pension

Many people in the UK are relying on a future inheritance to fund their retirement, with little thought about the tax implications and the need to start saving early on in adulthood.

According to Richard Stone, chief executive of The Share Centre, 11 per cent of UK adults are relying on inheriting enough to cater for their future needs, without making any savings now to plan for their income in retirement.

A poll conducted by trading website among 1500 adults aged 18-97 found that 11 per cent were hoping that the family assets would become their pension safety net.

53 per cent of people use savings accounts as their main savings vehicle.

40 per cent contribute to a cash Isa.

39 per cent have a work pension with employer contribution.

Many of those polled had all three - Isas, workplace pensions and savings accounts.

However, 10 per cent have no saving method in place.

Mr Stone said: “Holding out for a pot of money that isn’t necessarily guaranteed is a very risky game to play, and people need to take control of their long term savings to be sure it will come through.

“Even if you are left a healthy inheritance, it’s unlikely to fund your whole retirement, which could last 30 years or more. With increased life expectancy, more individuals will have already retired before they inherit, to say nothing of where this approach will leave the next generation.”

He added that the best way to prepare for the future was to save early and save often, highlighting that while investing has inherent risks, one cannot argue with the fact that the UK stock market has delivered a return of more than 600 per cent since 1990.

In November’s Autumn Statement, chancellor George Osborne forecast a significant increase in IHT receipts. He said this could rise 47 per cent from now to 2020/21, by which time receipts would hit £5.6bn.

Neil Jones, technical manager at Canada Life, commented that these huge rises demonstrate the importance of sensible estate planning.

“Advisers active in this area will be relieved by the news that there will be no changes to deeds of variation, which were rumoured to be facing a big shake-up.

“The government’s suggestion of a harsher crackdown on serial or aggressive tax avoidance are likely to dampen clients’ appetite for these products and will increase the appeal of legitimate offshore tax planning through an offshore bond.”