The new report looks at the intergenerational wealth transfer expected to take place in the UK over the next 30 years.

A survey of different British population groups finds that almost two-thirds of those (64 per cent) aged 25 to 45 years expected to inherit from their parents or grandparents, a share equal to about 11 million people, while about half - equal to about 5.1 million people, expect to inherit and gain at least £50,000 ($66,000).

A new report by Sanlam UK called The Generation Game looks at the intergenerational wealth transfer expected to take place in the UK over the next 30 years. It comprised research into three different cohorts: over-55s with investable assets of £100,000 who are leaving their children and grandchildren an inheritance; people aged between 25-45 who are expecting to receive an inheritance of at least £50,000; and 200 UK-based independent financial advisors. The responses of around 1,600 people were included in the report.

The report found that of those 5.1 million likely to receive over £50,000, the mean average value of the inheritance expected is £233,000, which would equate to £1.2 trillion. 

However, the report found that 38 per cent of those expecting to receive an inheritance have not yet spoken to the gifting party about their plan. Sanlam believes that there could be a mismatch between their expectations and reality.

The wealth management industry is constantly told about the importance of inter-generational transfer and understanding the needs of millennials, if only to ensure firms capture a slice of business as older groups retire. An issue has been whether the rising generation will choose different advisors to those used by their parents or grandparents.

Planning
Almost a third (31 per cent) of those aged between 25-45 surveyed for the report admit that they are putting off saving and “living in the now” because they know they have the money coming later down the line. A similar number (34 per cent) said they will be reliant on their inheritance to help with their finances in the future.

The report also asked those who expect an inheritance about what they will do with the money. The top answer was saving or investing at 38 per cent, and purchasing a property (34 per cent) was second.

Some 24 per cent of respondents said they will use the inheritance to pay off debt - the third most commonly cited use for inheritance.  Other uses included setting up a trust (23 per cent), starting a business (15 per cent), and using it to retire early (17 per cent).

“Our report highlights the scale of intergenerational wealth transfer that the UK is set to see over the next few decades,” said Sanlam chief executive, Jonathan Polin. “This level of inheritance is unprecedented, and its transfer presents both opportunities and challenges for the financial services industry and society more generally. That it comes at a time of societal, political and economic upheaval simply adds another element of complexity and uncertainty to an already extraordinary picture.”

“Clearly, the recipients of this wealth – many of whom straddle the line between Millennials and Generation Xers – are relying on their inheritance to act as a financial panacea. This is understandable in the context of rising debt levels, stagnant wage growth, and spiralling property costs, all of which have had a deleterious effect on disposable income. That said, over reliance on inheritance could be risky, especially if it affects the younger generation’s level of engagement with savings and investments today. As a first step, families need to have full and frank conversations about inheritance – this will help ensure younger generations have a realistic expectations of what they are to receive and can prepare accordingly,” Polin added.

This publication has frequently interviewed firms about how they are dealing with the next generation, and how they are trying to reach out to them as clients. WealthBriefing has interviewed Credit Suisse, Pershing and Julius Baer in the last year about their thoughts on the wealth transfer.