A recent survey reveals that two in five people (38%) either expect an inheritance or have already received one, with younger people holding higher expectations of receiving inherited wealth.
However, only 29% of individuals actually plan to leave an inheritance. Worryingly, a third (34%) of those expecting an inheritance consider it essential to fund their retirement.
These findings emerged from a study of 2,000 individuals conducted for Hargreaves Lansdown by Opinium in May 2023.
Sarah Coles, head of personal finance at Hargreaves Lansdown, commented, “We’re banking on an inheritance to fund our retirements, but this is a dangerous mistake. Life and relationships are far too complicated to stake our future financial security on. It means millions of people could be left high and dry if the plans of their loved ones change.”
Coles further warned of the unpredictable nature of future financial security, as loved ones may decide to spend their savings on their desired retirement lifestyle, need expensive care, or change their inheritance plans. These variables could lead to individuals inheriting less than expected or nothing at all.
Notably, older individuals were less likely to have received or expect an inheritance, with 62% of those aged 55 and above dismissing the prospect, compared to 39% of those aged 18-34.
Inheritance expectations may also be affected if the person has opted for equity release, which could deplete the value of their estate. Similarly, tax implications might reduce the overall amount left behind.
Even if an inheritance does come through, it may not align with one’s planned retirement timeline. As Coles pointed out: “You may be in your 70s by the time of your inheritance, and left with the nightmare of waiting until a loved one passes away before you can afford to stop work.”
Vulnerable groups, such as women, the ‘squeezed middle’ aged 35-54, and higher earners, are particularly reliant on an inheritance to fund their retirement.
Helen Morrissey, head of pensions analysis at Hargreaves Lansdown, cautioned that while an inheritance could play a role in retirement planning, it should not be the primary source for covering essential expenses. She advised that a robust Plan B should be in place in case of inheritance shortfalls, potentially including downsizing a home, working longer, or working part-time during retirement.
