The Prudential has reported that 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.
The insurer’s research revealed that, despite changes in recent years to rules around inheritance tax and passing on pension pots, only 28% 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 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 52% in 2011 to this year’s low of 28%.
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. 35% 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, 13% are paying more than £500 a month to support various family members.
Stan Russell, a retirement income spokesperson 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%), however, 15% are still providing financial support to their own parents and amazingly one in 20 (five%) are paying out money to support their grandparents.
Russell added: “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 grandad, 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 – 8% give money on a regular basis to expenses such as food or travel. A further 8% make one-off contributions to the cost of a luxury purchase like a new car, a holiday or a new television.
7% have provided a deposit for a house for a family member, and six% are helping to cover the cost of university education. However, the pressure to maintain income means that 23% plan to take paid employment in retirement and 23% plan to sell the family home to boost their income.
