Over 50s cutting back to build inheritance

Robyn Ashman

October 2, 2017

Over 50s are cutting back on essential living costs to save money for and build an inheritance pot for their loved ones, research from Saga Money has found.

The research found that while retired people want to save to pass on an inheritance, their children would rather they spent the money on living today.

More than eight in ten children say they would rather their parents spent their money in retirement than leave them an inheritance, yet four in five parents say they are concerned about leaving an inheritance for their children.

Just under half believe so strongly in the importance of leaving an inheritance they say that they will not spend frivolously in retirement to ensure there is something left behind for their children.

These contrasting views highlight how important it is for families to discuss inheritance openly and honestly, especially if this means parents and grandparents cutting back needlessly on essentials.

The research found that half of parents believe it is important to leave an inheritance for their children, although this sentiment weakens with age, perhaps as the reality of our later life financial position hits home or because as children grow older we see they are less dependent on their parents for financial help.

Londoners most believe it is important to leave something behind for their children (63%). People living in the East Midlands are the most dependent on receiving an inheritance – one in five says that their financial future is dependent on receiving money passed on from their parents, compared with one in seven nationally.

Just a quarter of people over 50 say that they plan to spend their money to ensure that they have a good retirement, rather than leaving it to their children as an inheritance. A third say that they do not think they will have anything left to pass on, with women much more likely to say this than men presumably because they have spent less years contributing to a pension to cover their costs in later life..

The study found that property is the biggest asset that forms part of inheritance – seven out of ten parents said the bulk of the inheritance they leave to their children will come from their home, rising to three quarters of those aged 50 or over. Almost half of parents say that savings will form a big chunk of their children’s inheritance.

Alex Edmans, head of the Saga Equity Release Advice Service, said: “Inheritance can be an emotive issue therefore it is important for parents to discuss inheritance with their children, but they should not feel obliged to leave an inheritance.

“For those who would like to leave something behind they should realistically consider how best to use the money they have to make sure they have enough to fulfil their retirement goals and have something left for later life care, as well as what to leave for their children.

“People also need to think about the tax implications on the inheritance they leave. With so many people planning to leave property to their children, it would be worth them considering whether to spend the money built up in their property first and leave their pension for the children to inherit. Much more money can be passed on in pensions tax free, than from property.

“Four in ten over 50s are deciding to give financial gifts to their family while they are still alive, by helping out with house deposits or wedding costs, enabling them to see the positive impact of their inheritance. Indeed one in five people who take out equity release use some of the money to give to family, with the average gift being £31,100 up from £29,000 in 2014.

“Of course it is important for those considering releasing equity from their property to seek specialist advice and make sure they understand the impact this will have on their ability to leave further inheritance in the future.”

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