Inheritance plans of this year’s retirees dented by family financial support costing £60,000 on average

03 June 2016

  • Only 28 per cent of those retiring this year think they will be able to afford to leave an inheritance
  • More than a third are already helping family with ongoing support of almost £250 a month on average
  • Retirees are providing multi-generation financial support – from their grandchildren to their own grandparents

The proportion of new retirees who know they will be able to leave an inheritance to their loved ones has fallen to its lowest level in six years, according to new research by Prudential1.

Despite changes in recent years to rules around inheritance tax and passing on pension pots, only 28 per cent of people due to retire this year think they will be able to afford to leave an inheritance.

The findings are taken from Prudential’s unique annual research into the financial plans and aspirations of people planning to retire in the year ahead – now in its ninth year. Over recent years the research has shown a sharp fall in the proportion of retirees expecting to be able to leave a financial legacy, from a high of more than half (52 per cent) in 2011 to this year’s low of 28 per cent.

Among this year’s retirees – the Class of 2016 – those who feel they will be able to leave an inheritance expect to leave, on average, £191,000 – a figure which is virtually unchanged from last year.

However, Prudential’s findings also show a potential reason for the decline, and highlight that retirees are making sure their families don’t go without. More than a third (35 per cent) of the Class of 2016 are already providing regular financial handouts to family members, worth an average of nearly £250 each month or almost £3,000 a year. Meanwhile, nearly one in seven (13 per cent) are paying more than £500 a month to support various family members.

Stan Russell, a retirement income expert at Prudential, said: “With the average retirement now lasting nearly 20 years, people retiring in 2016 who provide support to their families could hand over an average of £60,000 during their retirement. With this in mind it is perhaps unsurprising that the numbers of people expecting to leave an inheritance is on the decline.

“This kind of financial support will make a significant dent in all but the largest of retirement pots, but it can be overlooked by many when planning for life after work. A consultation with a professional financial adviser should help many people when planning their retirement finances and all the financial commitments they will need to cover.”

The members of the Class of 2016 who are providing financial support are doing so to an average of nearly four family members. They are most likely to support their children and/or their children’s partners (81 per cent), however, 15 per cent are still providing financial support to their own parents and amazingly one in 20 (five per cent) are paying out money to support their grandparents.

Stan Russell continued: “The pressure on retirees to provide this financial support continues to rise in line with the growth in the cost of housing, education, childcare and support for older people. In fact, these research results show that the concept of the ‘bank of mum and dad’ is already out of date – many of this year’s retirees must feel like the bank of son, daughter, grandson, granddaughter, partner, granny and granddad, all rolled into one.”

The research results also show that the money being provided by retirees to family members is most likely to be used for everyday living costs – eight per cent give money on a regular basis to expenses such as food or travel. A further eight per cent make one-off contributions to the cost of a luxury purchase like a new car, a holiday or a new television.

A generous seven per cent have provided a deposit for a house for a family member, and six per cent are helping to cover the cost of university education. However, the pressure to maintain income means that 23 per cent plan to take paid employment in retirement and 23 per cent plan to sell the family home to boost their income. 

Notes to editors

1 Research Plus conducted an independent online survey for Prudential between 25 November and 8 December 2015, among 9,318 UK non-retired adults aged 45+, including 1,000 intending to retire in 2016. 

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