Inherited wealth looks like the only major factor that could act to make individuals born in the 1960s and 1970s better off in retirement than their predecessors, on average.
When compared with those born a decade earlier at the same age, these cohorts: have no higher take-home income; have saved no more of their previous take-home income; are less likely to own a home; probably have lower private pension wealth; and will tend to find that their state pensions replace a smaller proportion of previous earnings.
However, the report by IFS researchers found that later cohorts are likely to receive much more from inheritances:
- If people’s expectations are correct, then receipt of inheritances will be far higher among those born in the 1960s and the 1970s than among those born earlier. Around 28% of those born in the early 1940s have received or expect to receive an inheritance, compared with 70% of those born in the late 1970s.
- But expected inheritances are unevenly distributed. Those who are already wealthiest expect to receive the most inheritance in future. For example, among those born in the mid-1970s, 35% of the wealthiest third expect to receive an inheritance worth at least £100,000, compared with just 12% of the least wealthy third.
- Expected future inheritances also tend to be concentrated within the same households: individuals expecting inheritances are far more likely to have partners who also expect them.
All in all, this suggests that the long-term fortunes of younger generations may be more tied to the wealth of their parents than has been the case for those already at, or close to, the state pension age. Those not fortunate enough to expect a significant inheritance look likely to be worse off in older age than current, and soon-to-be, retirees.
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