Millennials in the North West relying on £72bn inheritance to kick-start savings

Around one in five (21%) of those expecting inheritance admit they are putting off saving and “living in the now” because they know they have the windfall coming

Around a quarter (22%) expect at least £50,000, with the average expected value £173,000

Millennials in the North West are relying on £72bn inheritance to help them close the savings gap, according to a new report by Sanlam UK.

The Generation Game report, which looks at the “intergenerational” wealth transfer expected to take place in the UK over the next 20 years, reveals that 61% of 25-45-year olds in the North West expect to receive substantial inheritance from their parents and grandparents, with 22% expecting at least £50,000.  The average expected value of inheritance across the region is £173,000, which is around 26% lower than the national average of £233,000.

Across the UK, over 11 million people aged between 25-45 expect to receive some sort of inheritance from their parents, with nearly half (5.3 million) expecting to receive at least £50,000 in fixed assets or money.

Around one in five (21%) of those 25-45-year olds in the North West surveyed for the report said they are likely to receive inheritance admit they are putting off saving and “living in the now” because they know they have the money coming later down the line. A similar number (23%) said they will be reliant on their inheritance to help with their finances in the future. This is highlighted by the fact that 29% admitting to having savings of less than £10,000.

The report also finds an alarming number in this group will be relying on inheritance to pay off debt.

Planned uses of inheritance
Put it into savings account 37%
Purchase property 29%
Use it to pay off debt 29%
Use it to purchase things for me/my family 27%
Use it as my pension fund 18%
Set up a trust for my children 15%
Use it to retire early 13%
Invest in stocks, bonds, or equities 12%
Use it to pay school or tuition fees 11%
Use it to pursue a lifelong ambition 10%
Set up a business 9%
Gift to charity/causes which are close to my heart 5%
Invest in cryptocurrency 4%

Despite the importance of the wealth injection, 27% percent say that they will not be using a financial adviser to help them look after their finances.

Jonty Warneken, Head of Northern Region (Wealth Management) Sanlam UK, said: “Our report highlights the sheer scale of intergenerational wealth transfer that the UK is set to see over the next few decades. This level of inheritance is unprecedented, and its transfer presents both opportunities and challenges for the financial advisers in the North West. That it comes at a time of societal, political and economic upheaval simply adds another element of complexity and uncertainty to an already extraordinary picture.

“Clearly, many of the millennials due for the windfall are relying on their inheritance to act as a financial panacea. In the context of rising debt levels, stagnant wage growth, and spiralling property costs, this is understandable but worrying. Overreliance on inheritance can be risky, especially if it affects people’s level of engagement with savings and investments in the present. It also heightens the importance of getting the right advice.  By having full and frank conversations with advisers as well as family members, expectations and preparation can be properly managed.”

The Sanlam report comprises research of three different cohorts: over-55s who are leaving their children and grandchildren inheritance; people aged between 25-45 who are expecting to receive at least £50,000 in inheritance; and a network of UK-based financial advisers. It finds that, of those 5.1 million likely to receive over £50k, the mean average value of the inheritance expected is £233,000, which would equate to £1.2 trillion across the UK for just this cohort.

Download the full report, The Generation Game