Grandparents in Britain currently hold over $400 billion in wealth, much of which will be passed on to the benefit of grandchildren, new research has found.
Passing on of Wealth
According to the study by mutual insurer Royal London, although most of the wealth held by the grandparents’ generation will be passed on initially to their baby boomer children, the majority of this group expect to pass some or all of this inheritance ‘straight on’ to the next generation. In many cases this is because they feel under pressure to do so, but also because they are aware of the needs of their Millennial offspring.
The study looked at over 5,000 people from three generations – a ‘grandparents’ generation of 65-85 year-old homeowners, a ‘sandwich’ generation of 45-64 year-old baby-boomers, and a ‘children’s’ generation of 25-44 year-old Millennials. Each respondent had living family members in both of the other generations, and in the case of the 45-64 year age group and the 25-44 year age group, each had parents and/or grandparents who are owner-occupiers.
Inheritance Expectations
Respondents were asked about their plans to bequeath money or their expectations of receiving an inheritance. The researchers found that:
- There is very little evidence that the grandparents’ generation is ‘spending the kids’ inheritance now’ – in fact, they are the group most focused on passing money on to the next generation. The typical wealth of home-owning grandparents is in the £400,000 - £500,000 range, and they plan on average to share this between four and five recipients;
- The ‘sandwich generation’ (aged 45-64) feels more under pressure than their parents to pass on any inheritance, partly because they are more in touch with the challenges being faced by their Millennial children. The sandwich generation expect their share of any inheritance from the grandparents’ generation to be around £160,000;
- The children’s generation, whilst frustrated at the inequalities between the different generations, were not living their lives in expectation of an inheritance; but two in five had already received a lump sum from their grandparents and just over half had received a lump sum from their parents, most often to help with a deposit on a house or to pay towards a major event such as a wedding;
- Attitudes to inheritance differed sharply between the generations; for example, 86% of Millennials wanted to see their grandparents ‘spend freely to enjoy their retirement’, but only 56% of the over 75s said that they want to be able to ‘spend freely’ on themselves in retirement.
Inheritance Funding Homeownership Aspirations
One possible reason why the ‘sandwich generation’ feel they should be passing on any inherited wealth to their children is the difficulties faced by the Millennial generation in getting a foot on the property ladder.
Recent research by Halifax revealed many young Brits think it’s harder than ever to get on the property ladder, and half of 18-34-year-olds don’t think home ownership is a realistic option for their generation – with two thirds (65%) saying they don’t earn enough to afford it.
As many as a quarter of this age group believe that the only way they will ever own their own home is if they inherit enough money to allow them to do so.
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