Millennials rely on £72bn inheritance to kick-start savings

Millennials in the North West are relying on £72bn¹ inheritance to help them close the savings gap, according to a new report.  

The Generation Game report, which looks at the “intergenerational” wealth transfer expected to take place in the UK over the next 20 years, reveals that 61% of 25-45-year olds in the North West expect to receive substantial inheritance from their parents and grandparents, with 22% expecting at least £50,000.  The average expected value of inheritance across the region is £173,000, which is around 26% lower than the national average of £233,000. 

Across the UK, over 11 million people aged between 25-45 expect to receive some sort of inheritance from their parents, with nearly half (5.3 million) expecting to receive at least £50,000 in fixed assets or money.  

Around one in five (21%) of those 25-45-year olds in the North West surveyed for the report said they are likely to receive inheritance admit 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 (23%) said they will be reliant on their inheritance to help with their finances in the future. This is highlighted by the fact that 29% admitting to having savings of less than £10,000. 

The report also finds an alarming number in this group will be relying on inheritance to pay off debt.

• Nearly two-thirds (61%) of 25-45-year olds in the North West expect to receive substantial inheritance from their parents and grandparents, according to new report
• Around a quarter (22%) expect at least £50,000, with the average expected value £173,000
• Around one in five (21%) of those expecting inheritance admit they are putting off saving and “living in the now” because they know they have the windfall coming
• 23% say they will be reliant on this inheritance for their financial security in future
• Despite the importance of the wealth injection, around a quarter (27%) say that they will not be using a financial adviser to help them look after their finances

Despite the importance of the wealth injection, 27% percent say that they will not be using a financial adviser to help them look after their finances 

Jonty Warneken, Head of Northern Region (Wealth Management) Sanlam UK, said:

“Our report highlights the sheer scale of intergenerational wealth transfer that the UK is set to see over the next few decades. This level of inheritance is unprecedented, and its transfer presents both opportunities and challenges for the financial advisers in the North West. 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, many of the millennials due for the windfall are relying on their inheritance to act as a financial panacea. In the context of rising debt levels, stagnant wage growth, and spiralling property costs, this is understandable but worrying. Over-reliance on inheritance can be risky, especially if it affects people’s level of engagement with savings and investments in the present. It also heightens the importance of getting the right advice.  By having full and frank conversations with advisers as well as family members, expectations and preparation can be properly managed.” 

The Sanlam report comprises research of three different cohorts: over-55s who are leaving their children and grandchildren inheritance; people aged between 25-45 who are expecting to receive at least £50,000 in inheritance; and a network of UK-based financial advisers. It finds that, of those 5.1 million likely to receive over £50k, the mean average value of the inheritance expected is £233,000, which would equate to £1.2 trillion across the UK for just this cohort. 

You can download the full report, The Generation Game, here: https://www.sanlam.co.uk/intergenerational-wealth-transfer.aspx

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