Financial challenges threaten future retirees' plans, according to a new study by UK wealth manager St James's Place. 

Despite a majority of UK adults wanting to leave an inheritance, a study from St James's Place shows that economic pressures are hindering the next generation's desire to pass on wealth or assets to their loved ones.

While 68 per cent of UK adults believe that it is important to leave an inheritance, the research highlights how mortgage and rental costs pose challenges for future retirees. More than one in eight of those approaching retirement anticipate still having mortgage payments to make, compared with 4 per cent of current retirees, the survey reveals. Additionally, 16 per cent foresee not owning a property in retirement and continuing to pay rent, reflecting the changing economic conditions faced by different generations.

The research, which was conducted for St James’s Place by Opinium, covered 4,000 UK adults between 27 February to 8 March 2024. The results are weighted to nationally representative criteria.

Over half of future retirees also expect to provide financial support to other generations in their retirement, stretching finances even further, the research shows. For one in 10, supporting other generations means that they will have to reduce the amount they are able to pass on in inheritance.

A third less likely to pass down assets
Against this backdrop, confidence among future retirees in their ability to implement inheritance plans is also falling. Twenty-six per cent admit that they don’t feel confident they have the right plans in place compared with 14 per cent of current retirees. Overall, the next generation is a third less likely to pass down assets. While 65 per cent of current retirees expect to pass down property to their family through inheritance, this figure drops to 45 per cent among those yet to retire. Similarly, 60 per cent of current retirees plan to pass on cash savings, contrasting with only 40 per cent of future retirees who share the same intention.

“The next generation of retirees are grappling with unique economic circumstances compared to their parents and grandparents. Homeownership is increasingly challenging, leading many to anticipate paying off mortgages and renting well into retirement,” Claire Trott, divisional director for retirement and holistic planning at St James’s Place, said. “Additionally, supporting others financially in retirement is becoming more common. Overall, this means that fewer people think they’ll be able to pass on wealth or other assets to loved ones in an inheritance.” 

“The study underscores the importance of proactive financial planning for future retirees to navigate the complexities of new financial norms and to also support intergenerational financial needs,” Trott said. To secure a legacy for loved ones, she believes it is more important than ever to establish a robust financial plan early on: “This will allow greater opportunity to build wealth over time, without making unnecessary sacrifices along the way and putting off retirement indefinitely.”