Older Brits hesitate transferring wealth amid retirement cost fears
Older Brits are hesitant to transfer money to younger family members, despite wanting to provide financial help, as worries over affording care in later life continues to plague savers.
According to research from Octopus Money, 50 per cent of UK adults would like to give family members more money in their lifetime but hold back over fears of falling into retirement poverty.
Two thirds of UK adults who plan to give money to other family members said they would like to give more, but concerns over affording their own future expenses forced them to hold back.
In particular, growing concerns over affording later life care has caused both parents and grandparents to hold onto savings, with 45 per cent calling affording care a primary concern.
UK adults are advised to have £400k set aside to pay for care, however costs for both care homes and individual home help continue to soar.
According to Octopus Money analysis, for those self-funding, UK care home fees can cost up to £1,700 a week, meaning on average £80,000 a year is needed, leading savers forced to dip into other assets, aside from pensions, to fund their needs.
Kristian Manton, chartered financial advisor at Octopus Money said: “Pensions remain the most accessible source of funds for paying care fees and, outside of property, they are typically people’s largest asset.
“But increasingly, families are having to sell property to fund care, and without proper planning, these costs can quickly eat into inheritances, leaving the next generation with far less than expected.”
Younger generations hold out for money
Despite soaring costs, younger generations are still clinging onto hopes of receiving substantial gifts or inheritance, with many relying on this money to achieve major life goals.
Six in ten of Gen Z are banking on inheritance to give them a boost, while 56 per cent of Millennials are also counting on transferred money to help them get ahead.
Of the younger generations, over 50 per cent believe the only way they will be able to get a foot on the property ladder is through inheritance, as the first rung becomes increasingly harder to reach.
According to Nationwide, the average price of a UK property in August totalled £271,079.
Great Wealth Transfer uncertainty
While analysts and industry figures predict younger generations are poised to benefit from a £5.5trn ‘Great Wealth Transfer’ over the next two decades, many families remain in the dark over whether they will be part of this.
Only a third of Gen X and 50 per cent of Baby Boomers who are planning to give or leave money in their wills have discussed plans with their family members.
This puts other family members at risk of being subjected to large, unexpected tax bills which could weaken the amount left to them.
Manton said: “We can see the Great Wealth Transfer on the horizon, but it’s not all rosy for younger generations, we’re actually looking at a perfect storm of uncertainty if families don’t talk to each other.”
“A lack of communication…can also lead to unintended knock on effects for beneficiaries when money is passed on, such as children needing to sell assets.”