Majority Concerned Inflation Will Impact Wealth Transfer – SJP

Amanda Cheesley Deputy Editor London 24 April 2023


New research conducted for UK wealth manager St. James’s Place by Opinium looks at the impact of inflation on individuals planning to transfer wealth and receive it.  

Research released last week by St. James's Place reveals that the majority of those planning to pass on wealth are worried about the impact of inflation eating into what they can give.

The research covers 1,000 UK adults aged between 55 and 85 with £50,000 ($62,000) or more in investable assets, and 1,000 UK adults aged 18 to 70 who expect to receive a gift/inheritance in the next five years.

It shows that they expect to transfer £192,000 on average, a quarter of their overall household wealth. However, amid the current economic backdrop almost 62 per cent are concerned that rising inflation will impact or erode the amount of wealth they can pass on. 

There are also substantial concerns that the wealth intended to be passed on may be needed to fund other costs instead, the firm said. Fifty-three per cent of those planning to transfer wealth worry that they will have to use it to fund social care costs for themselves. Whilst 52 per cent are concerned that they’ll need to use it to pay for social care for their spouse/partner, and 33 per cent for their parents.

In addition, 38 per cent of respondents think that they’ll need to keep more of their money for their own retirement due to increased life expectancy. Whilst 35 per cent are concerned that their lack of retirement funds will mean that they need to use more of the money they had planned to pass on for themselves instead.

For those expecting to receive wealth, the main benefits this will have on their financial planning and decisions include allowing for a more comfortable retirement, being able to clear debt and having a more comfortable lifestyle whilst still working.

However, despite the tough market conditions of the past few years, the research shows that 44 per cent of those intending to pass wealth on say the amount they plan to transfer to a loved one has increased. Only 11 per cent say that it’s decreased, while 42 per cent say that it has not changed.

Among those who’ve increased the funds they’ll pass on, 43 per cent say this is because their investments performed better than expected, while a fifth attribute this to receiving financial advice which helped maximise the amount they could pass on.

Claire Trott, divisional director for retirement and holistic planning at St James’s Place, said: “The Great Wealth Transfer is widely anticipated, with younger generations expected to receive substantial lump sums over the next few years as Baby Boomers look to pass on their wealth.” 

“However, it’s clearly a difficult financial environment at present, and this is impacting most of society. This includes those aiming to transfer wealth, with many concerned about how the inflationary backdrop will affect their plans. In addition, other issues such as living for longer and the prospect of funding care in later life have become much more prevalent, and will need to be factored into plans too,” she continued. 

“Our research shows that many people are actually relying on receiving wealth from other generations, and so concerns around being able to pass on less than originally planned are worrying,” she added.

“To navigate this environment, and maximise the amount that can be passed on, it’s advisable to prepare as much as possible, and financial advice can make a huge difference to this. There are options available to protect wealth from certain taxes that would diminish the value of any assets that are passed down, these can include things such as pensions and trusts,” she said. 

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