More than one in four people expect an inheritance or have already received one (29%), according to reseach from Hargreaves Lansdown (HL).
Two in five people surveyed by the firm who expect to inherit said they need the money to fund their retirement (38%).
The percentage relying on an inheritance peaks in the years before retirement (55-64) at 45%.
Half of parents with children living at home say they need an inheritance to live on in retirement (47%).
Women are more likely than men to need their inheritance for retirement (41% v 35%).
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, said: “We’re banking on an inheritance to fund our retirements, and we could be in for a nasty surprise. Two in five of those who expect an inheritance are relying on it to supplement their pension, but this is a risky gamble, because life and relationships are far too complicated to stake our future on.
“We can’t accurately predict how life will turn out for our loved ones. They might end up needing expensive care, which will eat through an inheritance in no time. Alternatively, they may want to spend their money enjoying their retirement to the full. It could leave you with far less than you were expecting, and in some cases, you could end up with nothing at all.
“There are plenty of people who change their mind about who they leave money to, whether that’s because of changes in their relationships with potential beneficiaries, because they meet someone they want to prioritise, or because they change their attitude to inheritance and want to leave money to charity.
“You may have overestimated what they have to leave anyway. If they’ve used equity release to dip into the value of their home, for example, the debt and interest that has rolled up may mean they have little of it left to leave. Depending on their circumstances, the taxman may take a slice too.
“Even if you receive every penny you expect, you have no idea when it might arrive. If they live well into their 90s you could be 70 before you see a penny. The last thing you want is to be waiting for the death of a loved one to let you do the things you want during your golden years.
Vulnerable groups
“There are certain groups of people that are more reliant on an inheritance. Women are more likely to need a windfall for their retirement income, possibly because they tend to have less in their pension pots after taking time away from work for caring responsibilities and living with lower average wages.
“Half of parents with children at home also say they need an inheritance to pay for their golden years. This is likely to owe much to the enormous cost of bringing up children, and the other expenses that have taken priority over saving for retirement.
“If you expect inheritance to play a part in your retirement plans, you need to ensure it’s not a pivotal role, so the show can go on if doesn’t materialise. It may seem awkward, but you should also talk to your family to find out if they actually plan to leave you something – and how much it might be.”
Helen Morrissey, senior pension finance analyst, Hargreaves Lansdown. added: “An inheritance can play a role in retirement planning, but you need to consider it carefully. Your essential expenses should be covered regardless of whether or not you get an inheritance. – this can come from a combination of state pension, workplace and personal pensions as well as any other investments.
“Then any inheritance should help pay for the extras to make life more comfortable – or give you the lifestyle you want in retirement. If your pension savings will fall short without an inheritance, you need a robust plan B you’re prepared to use. This could include downsizing your home, working longer, or working part time in retirement.
“If an inheritance is likely to play some part in your retirement income, you need to be as sure as you can be that you’ll actually get one. It may feel like a tricky conversation to have with your loved ones, but you can’t base your planning on a vague assumption and crossed fingers. You may even find they’re happy to make lifetime gifts, which could be more tax-efficient.“
