We’re in the money? The £1 trillion bung coming our way

Musical Notes on Apple iOS 11.3“We’re in the money, we’re in the money, we’ve got a lot of what it takes to get along…” Musical Notes on Apple iOS 11.3*

Iona Bain

Millennials can expect part of a £1 trillion windfall from the banks of mum, dad and grandad, according to the latest stargazing into young people’s financial futures.

Over 11 million people aged between 25 and 45 in the UK expect to receive some sort of inheritance from their parents or grandparents, with five million of these expecting it to be worth 50K or more.

But when might they get it, and what could they do with it?

The report by wealth manager Sanlam predicts a £1.2 trillion intergenerational wealth transfer from the baby-boomers to those five million millennials and Gen Xers, working out at an average £233,000 each.

Almost a third of these dice-rollers admit putting off saving and “living in the now” because they know they have the money coming later down the line. A third also say they will rely on their windfall to prop up their finances in the future.

Somewhat alarmingly, almost a quarter (23%) say paying off debt will be the biggest use of their inheritance – second only to saving and investing (38%) and buying a property (34%).   Other ambitions include setting up a trust (23%), starting a business (15%), and using it to retire early (17%).

And the survey is all about people’s expectations, because almost 40 per cent of those banking on a windfall have never discussed inheritance within their family.

A further note of caution came from Liz Emerson of the Intergenerational Foundation, who said:

“Young generations may receive a shock if this wealth disappears due to social and nursing care costs – and those who do receive a windfall are likely to do so because they come from wealthier backgrounds.”

The report says the average jackpot of £223,000 is “ higher than the average UK house price of £227,000”.

But on timescales, it only says the transfer will happen “over the next 30 years”.

I can’t help remembering that the Resolution Foundation, which studied all this exhaustively, said this:

“For many of those who might expect to receive them, inheritances will come too late to support living standards during the expensive childrearing stage. The most common age at which 20-35-year-olds might inherit stands at 61.”

Call me presumptuous, but I doubt many over-60s will still be saving for a first-time home deposit and waiting for an inheritance to rescue them. 

To me, this adds force to the argument that millennials should be prioritising saving for a property over paying into a pension. These inheritances are likely to come too late to help people buy their own property but in good time to form part of later life funds. Surely this should be taken into account as part of the pensions conundrum?

Families in my experience don’t talk to one another about this stuff, so there could be a lot of ignorance and misunderstandings.  Even if the older generations don’t spend the money on care costs, it is not necessarily a given that the parental wealth will trickle down – there are baby-boomers who think ‘this is my money, I’ve worked for it and my kids can stand on their own feet’.

It all reinforces the need for our generation – whatever their expectations – to not only live in the moment, but save in the moment too.

WHAT DO YOU THINK? Leave a comment or tweet me – @ionayoungmoney.

*From the fabulous musical 42nd Street

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