Retirement Income 

Inheritance to drop £50k in 20 years

Inheritance to drop £50k in 20 years

The value of inheritances is expected to drop more than £50,000 in the next 20 years, or 40.6 per cent, as the number of families with multiple generations in retirement at the same time is increasing, according to research.

Wealth manager St. James’s Place, which surveyed 4,000 UK adults, found that current retirees with £50,000 or more in household assets, had an average of £261,375 in retirement funds – pensions and investments – and typically passed on almost half (48 per cent) of their funds to other generations – amounting to £124,676 on average.

In 20 years’ time, a similar group of individuals will have an average of £235,143 in retirement funds, but only expect to pass on 32 per cent to other generations - amounting to £74,070.

This was due to the fact that the number of families with multiple generations in retirement at the same time will reach 1.2m in 2039, rising from 624,000 families today, according to the firm's analysis of data from the Office for National Statistics. 

Year

Number of families with more than one generation retired

Change from 2019

% change

1999

328,000

-

-

2019

624,000

-

-

2024

704,000

+80,000

+13%

2029

863,000

+239,000

+38%

2034

996,000

+372,000

+60%

2039

1,192,000

+568,000

+91%

SJP’s research showed that a quarter (24 per cent) of future retirees expected to provide financial support in retirement to someone other than their current partner, such as children, grandchildren, a former partner or a partner’s children.

This compared with 7 per cent of current retirees who already do so and highlighted how retirement income will increasingly need to stretch across generations within often complex family structures, the wealth manager stated.

According to Claire Trott, head of pensions strategy at SJP, with people living longer, "the make-up of today’s modern family changing, and retirement provision more and more the responsibility of the individual, the way we need to think about planning for the future has fundamentally shifted".

She added: "The next generation of retirees can’t expect to follow the same path as those currently in retirement."

Regarding the decrease of inheritances in the future, Ms Trott argued it was concerning that the amount many believe they will be able to pass on was eroding. 

She added: "However, that needn’t be the case. Putting in place the right plans at an early stage will allow greater opportunity to build wealth over time and leave behind as much as possible when you’re gone, without making unnecessary sacrifices along the way."

Paul Stocks, financial services director at Dobson & Hodge, expects a marked change in the dynamics of inheritances over the next couple of generations – due to changes in longevity, requirement for care and increasing debt levels.

He said: "I would, however, question whether we should be putting the responsibility on to retirees to provide more for their beneficiaries – everyone should take responsibility for their own financial planning as far as is possible, and not rely on windfalls from others as they may find that they are disappointed."

maria.espadinha@ft.com

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