The Great Wealth Transfer: A Growing Divide in UK Society

Strategic Insights -

The largest wealth shift in UK history has begun, with an estimated £5.5 trillion being funnelled down to younger generations over the next 30 years. This significant transfer of wealth, dubbed "the great wealth transfer," takes place primarily through gifts and loans from parents to their adult children, with £17 billion being given away or lent annually. However, this process is exacerbating existing inequalities, as those with family wealth enjoy significant advantages in accessing better education, job opportunities, and homeownership.

Key Takeaways:

  • The great wealth transfer sees £17 billion being given away or lent annually, with the majority going towards buying or renovating properties, thereby benefiting the housing market.
  • Family wealth provides access to better job opportunities, with rent in London being almost double the national average, locking out those without a leg-up from the city's job market.
  • The top 20% of earners receive 26 times as much as the bottom 20% in gifts, while between 2018 and 2020, the top 5% of transfers accounted for more than half of the total moved from one generation to another.
  • 40% of millennials say they are not focused on saving for retirement as they expect to inherit money or property, with nearly one in four Generation Z respondents sharing the same expectation.
  • The children of homeowners are more than twice as likely to become homeowners themselves as the children of renters.
  • Gifts from parents or grandparents in their lifetime can prove more helpful than inheritances, with 25% of the £17 billion given away in 2020 being in the form of gifts or loans.
  • Anyone fortunate enough to have their university tuition fees and maintenance costs paid for will dodge a debt that averaged £53,000 for students who graduated last year, avoiding interest on student loans.
  • 38% of the working population expect to have a worse standard of living in retirement than they have now, with a growth in inequality stemming from the great wealth transfer leading to lower homeownership rates and devastating impacts on retirement prospects.

Statistics:

  • £17 billion is given away or lent annually as part of the great wealth transfer.
  • The average property price has more than trebled from £84,000 in 2000 to £293,000 today, with wages being stagnant in real terms since the 2008 financial crisis.
  • 40% of renters say it would be impossible to buy a home without an inheritance or loan from family, according to Barclays.
  • Half of millennials and nearly one in four Generation Z respondents are not focused on saving for retirement as they expect to inherit money or property.
  • 38% of the working population expect to have a worse standard of living in retirement than they have now.
  • The cost of private renting over the course of retirement is almost £400,000, with the government's goal of building 1.5 million homes during this parliament only being met by one in nine councils.

Sources:

  • Institute for Fiscal Studies (IFS)
  • Barclays
  • Standard Life
  • Hitched
  • YouGov
  • Office for National Statistics (ONS)
  • Rightmove
  • Student Loans Company
  • Intergenerational Foundation