The UK economy could benefit to the tune of £677bn as wealthier older people transfer their assets down the family line, according to research from St James’s Place.
Over 55s have an estimated £6.6tn of wealth locked up, and are making plans to release almost a third of this total, excluding property, to their children and grandchildren. This means giving away around £920bn over the next three decades.
Recipients are expected to save 25 per cent of any wealth they receive and spend the rest. Around 40 per cent of this sum is estimated to be spent on property, with the remainder spent on goods and services.
The economy would benefit from such generosity to the tune of £1.65 for every £1 transferred. The £677bn pot generated would be enough to fund the purchase of approximately 3.4 million homes for first-time buyers, provide 21.2 million deposits or pay the tuition fees of 24 million university students.
Iain Rayner, joint chief operating officer at St James’s Place, said: “Families need to think about how and when they intend to make transfers to maximise the impact and achieve the most beneficial tax treatment – and lucky recipients really need to think about how and when to best deploy these gifts to change their lives."
The research also shows 31 per cent of people aged 55 to 85 with £50,000 or more in assets have already transferred money to their children or grandchildren, while 61 per cent intend to do so during their lifetime. Just 36 per cent say they won’t be passing on any money while they still live.
Phil Billingham, partner at Perspective Planning, said: “While the over 55s certainly have sizeable wealth it is likely that they will look to pass on their property to the next generation, rather than give money and other assets. This would benefit the economy as the younger generation would have more money to spend having been freed from paying rent or mortgages. However it may take longer for the economy to see the benefits.
“I think over 55s will be keener to keep hold of their liquid assets as it is unclear right now to what extent they would need to fund their own long-term care.”
St. James’s Place commissioned the research carried out by Capital Economics to a sample of 2,002 UK nationally representative adults aged over 55 years, conducted between 1 and 6 of March 2017. Economic analysis and insights from the consumer research were supported by Capital Economics.
