Fewer than one-in-three people expect to benefit from Britain’s big inheritance windfall

The value of inheritances is set to double over the next 20 years, but recipients are in the minority, with fewer than one-in-three (32 per cent) having benefited or expecting to benefit from an inheritance or gift in their lifetime, according to new research published today (Thursday) by the Resolution Foundation.

Intergenerational rapport fair? – funded by the Family Building Society, and which draws on a YouGov survey of 8,749 adults – examines the nature and scale of inheritances and gifts in the UK, and how these intergenerational wealth transfers affect people’s behaviour.

The report notes that the value of inheritances is set to double over the next 20 years, but they will remain far from universal. Wealthier and higher-income families are significantly more likely to be recipients, with the richest fifth of earners twice as likely to receive a significant transfer as the poorest fifth (50 per cent compared with 25 per cent).

These transfers can have a significant impact on recipients’ lives. A third of gifts (33 per cent) are given in order to help with a property purchase, while six per cent of homeowners say that they would have been unable to purchase a property without the transfer, equivalent to 1.6 million households.

The linked phenomena of growing inheritances and home ownership challenges facing young people – just one-in-twelve of non-homeowners aged 25-to-34 have sufficient savings to afford a 10 per cent deposit on the average first-time buyer home in their region – are likely to increase the role of family wealth transfers in determining many people’s lifetime living standards, and increase the pressure on older generations to pass on wealth, the authors say.

The report finds that wealth transfers have an impact not just on recipients but also on the behaviour of givers, which is often neglected. A substantial proportion of older cohorts who want to transfer wealth change their behaviour in order to do so, including one-in-six (16 per cent) who save more, and one-in-ten (9 per cent) who have downsized their houses or expect to do so in the future.

But wealth transfers will not solve the UK’s youth home ownership challenge. Uncertainty about costs in retirement means older relatives will pass on wealth too late to assist many young people, with social care costs cited as a concern by 45 per cent of over-65s who intend to make a transfer and are uncertain about the value of their gift. The typical age at which 20-35-year-olds are projected to receive an inheritance is 61.

And while young people could alter their life decisions in anticipation of receiving an inheritance or gift, the report finds that this is rarely the case. Only 7 per cent of recipients experience a significant impact on their life in advance of receipt.

The report concludes that while significant, intergenerational wealth transfers will introduce significant amounts of luck into younger generations’ living standards and cannot resolve low rates of youth homeownership alone.

Jack Leslie, Senior Economist at the Resolution Foundation, said:

“A boom in household wealth over recent decades has led to expectations of a huge inheritance windfall. But inheritances go to too few – and too late – to resolve Britain’s youth home ownership crisis, with just a third of people having received or expecting to receive an inheritance.

“These wealth transfers often have a significant impact on the lives of recipients, enabling 1.6 million households to own a property that they wouldn’t have been able to otherwise. But with the highest-income families twice as likely to be recipients as the lowest, the benefits are far from evenly distributed.

“With many givers also changing their behaviour in order to facilitate those transfers, the impacts of transferring wealth are far-reaching.

“A greater role for inheritances, and wealth in general, will be a central feature of 21st Century Britain, shaping the lives of generations young and old.”