Parents are choosing to leave their kids less money, which means younger generations need to get serious about planning for the future, says Hannah Blakey of Maurice Turnor Gardner
A recent study has revealed that around 35 per cent of working Britons are relying on inheritances to provide them with a stable financial future, with a fifth of individuals confessing that they would not be able to retire comfortably without such a windfall.
With an ageing population meaning people now spend almost as long in retirement as they do in the workplace, this reliance on a source of wealth that is ultimately out of the recipient's control (rather than focusing on saving for retirement through more conventional means) is a real cause for concern.
This precarious situation is even more worrying considering the number of people actually leaving significant sums of money to the younger generation is dwindling. The same study revealed that 28 per cent of retirees do not expect to leave much to their children at all, with as many as 20 per cent of the older generation planning to spend their money enjoying their later years rather than leaving it behind. A further 4 per cent revealed that they were planning to leave the entirety of their estate to charity.
This reflects a growing shift in attitude among retirees where personal enjoyment or philanthropic aims are increasingly prioritised over the financial legacy they will eventually leave to their offspring.
Each parent will have differing reasons for choosing this approach. While some may fear a large influx of wealth may negatively impact their children's work ethic, in a world where parents are spending more, and for a longer period of time, to launch their kids into adult life, some parents may feel they have given their kids a sufficient amount already.
The most famous proponent of this approach to inheritance is the American business magnate, investor and philanthropist Warren Buffett. Buffett has pledged to give away 99 per cent of his fortune to philanthropic causes and was quoted as saying, 'I still believe in the philosophy… that a very rich person should leave his kids enough to do anything but not enough to do nothing.'
With sound planning, it is possible to successfully transfer wealth to the next generation without hindering a child's own chances of finding success. However, regardless of this, it appears that the next generation should start to face the onset of an era of diminished expectations when it comes to receiving a windfall from an older generation.
As attitudes towards wealth planning change, it is therefore ever more vital that (rather than relying on an inheritance that may not appear) traditional means of saving for retirement are considered. With a plethora of everyday demands on our time, retirement planning is often at the bottom of the to-do list.
However, this recent research highlights that if individuals do not take steps to secure for themselves the lifestyle they hope for in retirement, they may end up disappointed.
Hannah Blakey works at boutique private wealth law firm Maurice Turnor Gardner LLP