The UK’s younger generations are counting on the transition of wealth between generations to fund their financial goals, reveals new research from Fidelity International.
Two-fifths (43%) of people expect to receive an inheritance or lifetime gift of wealth from family and friends at some point, with millennials and Generation Z – or those under the age of 45 – the most expectant generations (65%)2. The average inheritance received currently stands at £70,639, with lifetime gifts amounting to £58,439.
Almost a third (32%) of those who have already received an inheritance or lifetime gift – or expect to in the future – have directed the funds towards their savings or pension. A quarter (24%) have used this to pay off a mortgage, while over a fifth (22%) put the money towards climbing the property ladder – highlighting the extent to which the transferral of intergenerational wealth is fuelling the housing market.
Other plans include paying for one-off expenses or ‘luxury’ items (18%), paying off debts (17%) or student loans (9%), or simply funding-to-day expenses (14%).
Dawn Mealing, Head of Advice Policy and Development at Fidelity International, comments: “Buying a home and saving for retirement are considered two of the most significant milestones upon the road to financial security. However, our research highlights just how many of the UK’s younger generations are counting upon the passing down of wealth from family and friends to achieve them.
“Families are increasingly looking at how they tackle these goals together, considering how and when this transition of wealth takes place – either as an inheritance, or sooner as a lifetime gift – so it can be used most effectively. With expectations high, it’s important that families and friends discuss their intentions so there is a clear understanding of the wealth that will be passed on and when.”
Despite many people looking to use their inherited wealth to achieve long-term financial goals, less than half (45%) have taken some form of investment advice. A fifth (20%) went to another professional for advice, while 16% looked online and 15% spoke with an independent financial adviser (IFA). Just over one in ten (14%) spoke to their bank.
Dawn Mealing continues: “Financial advice can provide invaluable support for those looking to pass wealth on, as well as to those who receive it. From the perspective of the older generation, seeking advice can help them to navigate the complexities of Inheritance Tax (IHT) and mitigate some of the potential losses the 40% rate might pose.
