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The changing shape of inheritance

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How do today’s over-55s really feel about the taboo issue of inheritance? We found out in our spring 2013 Real Retirement Report. 

Inheritance: an outdated tradition?

The passing of wealth from generation to generation is a time-honoured tradition, but one that is threatened by current financial and social pressures. For many over-55s, funding retirement and paying for long-term care is becoming increasingly difficult. Understandably, the overwhelming majority (77%) prioritise paying for their own living costs over supporting close family (17%) or leaving an inheritance (7%).

But for those who can afford it, there’s a case to be made for passing on wealth sooner rather than later. With younger relatives struggling to get on the property ladder or raise families of their own, why not help out now instead of waiting to leave an inheritance? Our report reveals that giving a cash loan to family is the most common kind of financial support offered instead of leaving an inheritance, and 21% of over-55s have done this.

New generation: new rules

Despite the country’s economic struggles, more than half the over-55s (53%) are confident they will pass on more than their parents did before them. However, this conviction is strongest among those who are further into retirement. Only 32% of 55-64s expect to leave significantly more that their parents did, while 21% feel they will not be able to leave an inheritance at all.

It’s telling that 55-64s are the least optimistic about the prospect of leaving an inheritance. Retirement is not the same as in their parents’ day. This generation of retirees need their money to stretch further and work harder, and increasing numbers count on a wage to boost their income.

Whereas people might have once hoped to clear their mortgage debt before retirement, 27% of 55-64s reported that they still have a mortgage on their home. By taking debts with them into retirement, when they do give up work they’ll likely continue to face on-going financial decisions. Careful planning before and during retirement will be essential if they are to realise their ambition of leaving an inheritance.

Rising financial fears

For the UK’s retirees, low interest rates and rising living costs continue to erode savings pots and push debt repayment down the list of priorities.

It’s encouraging to see incomes rise since December 2012, but the over-55s are under no illusions that the general atmosphere of austerity is here for some time yet. Both short- and long-term financial fears have risen since our last report, and with further welfare cuts in the offing, carefully balancing finances in later life continues to be a priority. 

Clive Bolton, managing director of Aviva’s At Retirement business, comments: “The idea of providing an inheritance is far from extinct, and something that many over-55s aspire to. But for the current generation of retirees, there is clearly far more variety in both what they choose to leave and also the ways they choose to pass on their wealth. As with many aspects of retirement finances, prudent planning and careful management can really pay dividends – helping you to manage living costs without feeling you have to sacrifice your own comfort to provide for family members.”

Read the full report.

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