And finally…Idea of inheritance is dying as retirees start ‘giving while living’



hsbcThe UK’s biggest bank has published the results of a new survey that suggest we are now seeing the death of the traditional idea of leaving an inheritance.

HSBC found that around half of the UK’s retirees say they are now “giving while living”.

Three in five (60 per cent) people who have retired said they are already providing regular financial support to their family and friends, according to the survey of more than 16,000 people living in 15 countries, including the UK, found.

Some 50 per cent of retirees surveyed in the UK said they are giving regular financial support to someone, such as a spouse, a younger relative or friends.

In the UK, 19 per cent of retirees said they were giving financial support to their grown-up children and 9 per cent were helping their grandchildren out financially.

Across the global survey, Malaysia, Indonesia and Turkey had particularly high proportions of older people passing wealth on while they are still alive.

Australia, the United States and Canada all had lower proportions of retirees who said they were giving while living than the UK. France had a slightly higher proportion, at 53 per cent.

Charlie Nunn, group head of wealth management at HSBC, said: “The ‘living inheritance’ adds another dimension to the already complex financial pressures faced by retirees.

“A desire to support loved ones during your lifetime is of course understandable, but for many people this comes at a cost both to their retirement dreams and to their ability to leave a legacy.

“At the same time, today’s working age people are putting their future finances at risk by relying on a living inheritance from retired loved ones, as this may not always be forthcoming.”

The findings in the Future of Retirement report have been released just weeks after the UK Government launched new freedoms allowing people much greater choice over how they spend their pension pots.

Instead of being required to buy an income called a retirement annuity with their pension savings, people aged 55 and over with a defined contribution (DC) pension can take their money how they wish, subject to their marginal rate of income tax.

The global research found the potential for a “mis-match” between people’s hopes of receiving an inheritance and the extent to which it will help them in reality.

It found that while nearly three quarters (74 per cent) of working age people expect to leave an inheritance to their children, only 29 per cent are confident in doing so. In the UK, 58 per cent of working age people expect to leave an inheritance, but only 33 per cent have ever received one.

Working-age people in the UK may have “unrealistic expectations” about the inheritance they expect to receive, the report warned. More than half (54 per cent) of those who expect to receive an inheritance in the future say it will help fund their retirement, whilst 15 per cent say it will completely or largely fund it.

Looking at the impact of the “living inheritance” on retirees, the report found that more than two in five (41 per cent) older people are worried about not being able to support family or friends financially and a similar proportion are concerned about being reliant on family or friends for financial support.

The global research also found that almost three-quarters (73 per cent) of people have been unable to realise at least one of their hopes since retiring, which the report said was a potential consequence of “giving while living”. In the UK, 53 per cent of retirees had been unable to achieve at least one of their dreams.

Commenting on the findings, Tom McPhail, head of pensions research at financial services firm Hargreaves Lansdown, said: “The present generation of retirees has enjoyed a fairly generous system, including widespread final salary schemes and generous tax breaks.

“This is all changing; investors have more freedom but also greater responsibility to manage their retirement savings prudently. Increasing life expectancy and the looming risk of later life care costs mean that those retiring today should think very carefully about how and when they choose to draw on their retirement savings.

“For most people, it would make sense to pass on wealth in retirement only after taking sensible steps to secure financial security for the rest of your life. This could mean buying an annuity with at least part of your pension pot.”

Lisa Harris, a spokeswoman for Saga, the over 50s tnsurance, travel, financial services and healthcare company, said that, for many people, being able to financially help younger family members with house deposits, wedding costs, or university fees “when they need it most and being able to see the pleasure that a living inheritance can bring is really rewarding”.