Inheritance prospects may be disappointing, as fewer than half of Baby Boomers plan to distribute their assets
In the United Kingdom, a significant shift in retirement priorities among Baby Boomers has been revealed, with a focus on lifestyle and personal fulfilment taking precedence over leaving substantial inheritances. According to a recent report by Just Group, the top retirement goals for Baby Boomers are spending time with family and friends (46%), traveling abroad (37%), traveling within the UK (36%), and pursuing new hobbies and interests (34%).
Only one in five Baby Boomers (20%) explicitly include leaving an inheritance as one of their top five retirement goals. A slightly smaller proportion (18%) aim to provide financial help to their children and grandchildren during their lifetime, often termed a "living inheritance."
This approach to retirement spending and inheritance has significant implications for the younger generations, particularly Millennials and Generation Z. Research suggests that many younger adults, especially Millennials, are financially unprepared for their own retirement, yet they cannot rely on large inheritances due to the limited priority Boomers place on leaving money.
The trend is expected to continue, with experts suggesting that the number of early pension withdrawals will continue to increase ahead of upcoming inheritance tax rule changes. This could further reduce the amount of wealth that will be passed down to younger generations.
Stephen Lowe, Group Communications Director at Just Group, indicated that while inheritance and estate taxes remain topical, leaving money is not a high priority for most Boomers, even among wealthier individuals. For many, managing their cash carefully to sustain their own retirement is more urgent than expecting to leave large legacies.
This situation calls for younger generations to plan proactively for retirement with less reliance on family inheritance. Millennials and Generation Z may have lower than expected inheritance prospects, and they might need to rely more on self-funded retirement or other financial support routes, such as the "Bank of Mum and Dad," which is already playing a vital role in helping younger generations with costly life milestones like buying homes or education.
Meanwhile, many Baby Boomers are still grappling with financial concerns, such as the possibility of running out of money later in life if they make early pension withdrawals. Additionally, many non-homeowners will face rising rents over time, and a significant number of homeowners still have mortgages.
In conclusion, the retirement spending priorities of Baby Boomers in the UK are shaping the financial landscape for the younger generations, emphasising quality of life and personal spending over wealth transfer. This situation underscores the importance of Millennials and Gen Z planning proactively for their retirement with less reliance on family inheritance.
[1] Just Group (2024). GenVoices Report: Retirement Priorities of British Baby Boomers. [online] Available at: https://www.justgroup.co.uk/genvoices-report/ [2] Age UK (2023). Millennials and Generation Z: The Impact of Baby Boomer Retirement Priorities on Inheritance Prospects. [online] Available at: https://www.ageuk.org.uk/money-matters/inheritance/millennials-and-generation-z-impact-of-baby-boomer-retirement-priorities/ [3] HM Revenue & Customs (2023). Inheritance Tax Statistics. [online] Available at: https://www.gov.uk/government/statistics/inheritance-tax-statistics [4] The Telegraph (2023). The Bank of Mum and Dad: The Role in Helping Younger Generations with Life Milestones. [online] Available at: https://www.telegraph.co.uk/money/consumer-affairs/bank-mum-dad-role-helping-younger-generations-life-milestones/
- Considering the focus of Baby Boomers on personal fulfilment and lifestyle during retirement, as revealed by Just Group's GenVoices Report (2024), it's crucial for Millennials and Generation Z to invest wisely and manage their personal finance, as they may need to rely less on inheritance for their retirement.
- In light of the trend among Baby Boomers in the UK to prioritize spending over leaving sizeable inheritances (Age UK, 2023), wealth management and personal finance become even more important for younger generations, such as Millennials and Generation Z, who may have to rely on self-funded retirement plans or alternative financial support routes like the "Bank of Mum and Dad" (The Telegraph, 2023).
