Leave an inheritance, or enjoy retirement?
17th October 2024
7 min read
PRESS RELEASE
Living longer in a cost of living crisis is causing a generational shift in attitudes towards inheritance
- 32% of over 50s want to spend their money on enjoying retirement, even if it means no inheritance for their family
- 43% do want to leave an inheritance for their kids – but only if they don’t have to cut back on their own retirement
- But a third of people would rather their folks enjoyed themselves, with only 6% saying they are relying on getting the cash
- Many of the younger generations will reach their 60s and beyond before inheriting, when they’re more likely to have already achieved financial stability
- Over 50s experts SunLife urge families to open the discussion, to ensure retirees aren’t needlessly holding back on potential enjoyment, if kids aren’t in need of the money
- Equity release could unlock a better quality of retirement for many homeowners, but inheritance fears are standing in the way
New data from over 50s experts SunLife reveals a real split amongst Brits on the ‘inheritance’ debate.
Brand new findings from the 3rd Life Well Spent report, released today, found that leaving an inheritance is becoming less important in each generation, with 50% of 70+ year olds saying they’d like to leave an inheritance to loved ones, compared to 40% of 50-59 year olds.
In contrast, a third of people over 50 (32%) would rather spend their kids’ ‘inheritance’ on enjoying their own retirement, even if it means there would be nothing left to inherit.
With 63% of over 50s worrying about the cost of living, and 34% about running out of money in retirement, it’s no wonder priorities are changing. Especially given a recent study(www.theguardian.com opens in a new tab) which concluded that baby boomers are set to live longer but in poorer health than previous generations, meaning potentially high medical and care costs on the horizon to take into account.
And adult kids aren’t blind to these pressing financial concerns. A third of those with living parents would prefer their parents to spend their hard-earned cash on themselves, even if it meant no inheritance.
This includes just 27% of 19-24 year olds, rising to 38% of 45-54 year olds – demonstrating the fact that while we might romanticise leaving an inheritance, many younger generations will reach their 60s and beyond before their parents pass away. At this point they’re more likely to have already achieved financial stability, and also be more acutely aware of the cost of a decent retirement.
Just 6% say they are relying on an inheritance to finance their future.
5.4 million over 50s want to give an ‘early’ inheritance – and 6.5 million already have!
The research also found that a popular way of passing on family money is through early inheritance. 21% - the equivalent of 5.4 million people – say they would prefer to give early inheritance so they can see loved ones enjoy the money, rather than leaving inheritance in their estate.
Clearly many see more benefit in their loved ones getting this money early. In fact, 1 in 4 (25%) of people over 50 – equivalent to around 6.5 million people – have given their loved ones a ‘significant cash gift’ in the past five years, rising to 36% of people aged 70 and over.
Of that 6.5 million, 17% (1.1million) said the gift was purely for ‘early inheritance’ rather than for anything specific. Other reasons for gifting include helping with home deposits (19%), general cost of living help (23%), help repaying debt (14%), or to put towards a vehicle (17%) or wedding (13%).
| Overall | 50-59 | 60-69 | 70+ | |
|---|---|---|---|---|
| I would like to leave some inheritance to my family | 43% | 40% | 43% | 50% |
| I would rather spend on enjoying my retirement even if it means less/no inheritance for my family | 32% | 31% | 33% | 29% |
| I would like to give early inheritance so I can see my family use the money | 21% | 21% | 21% | 22% |
| I would like to save enough to leave an inheritance, even if it means cutting back my spending in retirement | 12% | 12% | 11% | 12% |
| I would like to give early inheritance so I can mitigate the Inheritance tax (IHT) liability | 12% | 12% | 11% | 10% |
Base: UK residents aged over 50
1 in 3 adult children are hoping for an inheritance – 6% are relying on it – and 7% want it now!
SunLife’s research shows that while 33% of Brits think their parents should spend their hard-earned cash on themselves, even if it means no inheritance for them, a similar number are either hoping – or relying – on an inheritance. But just as we are more likely to prefer our parents to spend the money as we age, older brits are also less likely to be hoping for an inheritance.
However, it is older ‘children’ that are the most likely to be depending on money being passed down; overall, 6% of Brits say they are relying on inheritance from their parent(s) to fund their own retirement, but this rises to one in 10 (10%) of people aged 55-64. 12% of 45-54 year olds say they could do with the money now, rather than waiting another 10 to 20 years.
| Overall | 18-24 | 25-34 | 35-44 | 45-54 | 55-64 | 65+ | |
|---|---|---|---|---|---|---|---|
| I would prefer my parent(s) to spend their money on enjoying retirement, even if it means no inheritance for me | 33% | 27% | 31% | 33% | 38% | 34% | 39% |
| I would like to receive some inheritance but am not relying on it | 27% | 27% | 26% | 26% | 26% | 22% | 43% |
| I am not expecting to receive any inheritance as my parent(s) do not have much money | 13% | 10% | 12% | 13% | 17% | 17% | 11% |
| I would prefer to receive early inheritance so I can use the money now | 7% | 7% | 8% | 5% | 12% | 3% | 4% |
| I am relying on the inheritance money I will eventually receive from my parent(s) to finance my future | 6% | 6% | 8% | 7% | 4% | 10% | - |
Base: UK residents aged 18+ with at least one living parent
Mark Screeton, CEO at SunLife comments: “Our data shows that amid the pressures of high cost of living, the subject of ‘inheritance’ is quite divisive. 43% of over 50s would like to leave money behind – and 12% will sacrifice their own retirement to do so – but a third of those they are scrimping for say they’d rather their parents spent their money enjoying retirement.
“But on the other hand, 27% say they’d like to receive an inheritance, and a further 6% say they are actually relying on it. So, it is clear we need to be having more open conversations with our loved ones about all the financial options.”
Lifetime gifts
One option that could ensure money is passed on to loved ones without having to sacrifice retirement is through ‘early inheritance’. Gifters can budget how much they are able to give, and then, not only can they see family enjoy the money they are passing on – the vast majority (78%) of people see an improvement to their overall happiness as a result. And there could be tax benefits too.
Those who receive an inheritance must pay 40% inheritance tax (IHT) if the sum is above a certain threshold. But with cash gifts, there is usually no tax to pay (unless you are earning interest on the money, or the gift giver passes away within 7 years of giving the gift) and there’s no need to declare them in a self-assessment.
Equity release
But not everyone has the funds available to give early inheritance, especially those homeowners who are property-rich and cash-poor. Another option for older homeowners looking to boost their own retirement income, create a little ‘inheritance’, or both, is equity release. Applicants can typically release between 20 and 60% of the value of their home, with the option to not make any repayments until they pass away or move into long-term care.
This could unlock significant retirement funds which could be used to pay off an existing mortgage, renovate the home, travel, give early inheritance, or just boost quality of life in retirement.
Unfortunately, inheritance fears could be standing in the way of people even considering equity release and finding out whether it could work for them.
Mark concludes: “Equity release has earned a terrible reputation in the past, and despite modern products offering a huge host of consumer protections, many still fear it will leave them or their estate in debt.
“But as long as your equity release provider offers a ‘no negative equity’ guarantee, you’ll never leave family in equity-release-related debt.
“However, a lifetime mortgage does accrue compound interest, meaning your amount owed could reach your property value if you’re not making repayments. But equity release loans with a ‘no negative equity guarantee’ can’t leave you owing more than your home is worth, so family will never inherit debt from the equity release. So, the question comes down to how important leaving an inheritance is.”
ENDS
According to the ONS(www.ons.gov.uk opens in a new tab), there are 26,028,478 over 50s in the UK.
- 21% of 26,028,478 is 5,465,980
- 25% of 26,028,478 is 6,507,120
- 17% of 6,507,120 is 1,106,210
About the Life Well Spent report 2024
To better understand the relationship between happiness and major spending decisions, SunLife asked over 2,000 people over 50 to share:
- What big purchases they’ve made in later life
- The big purchases they’d like to make if money was no object
- How their spending has affected their happiness
The report covers holidays, home improvements, family, debts, other big purchases and equity release. With the cost of living on everyone’s minds, the findings are a window into the lives, concerns and dreams of people over 50.
A supplementary survey of 1,000 UK adults was conducted in August 2024, to determine the general population’s thoughts on receiving an inheritance.
About SunLife
SunLife has been around since 1810, making it one of the oldest financial services companies in the UK. It offers products such as over 50s life insurance and equity release.
SunLife is a part of Phoenix Group(www.thephoenixgroup.com opens in a new tab), the UK’s largest long-term savings and retirement business.
SunLife was the first company in the UK to offer life assurance without a medical, and has for many years been the UK’s most popular over 50s life insurance provider (Source: Association of British Insurers). It is also author of one of the longest-running and most highly-regarded reports into funeral costs – the Cost of Dying report.
SunLife also works with leading finance journalists and industry experts to offer everyone over 50 free tools and guides to help with managing their money, planning a funeral and making the most of life after 50.