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The amount of money exchanged between British family members hit an all-time high of £69bn last year and that sum looks set to continue to rise in the medium-term.
Predictions suggest UK-wide inheritance payments and gift transfers are likely to almost double to £115bn by 2027. Looking further ahead, to 2055, and a colossal £5.5tn is expected to change hands.
There is a relatively straightforward reason for this. For decades, the nation’s population had in general been getting richer; with UK wealth hitting more than £10tn in 2016, almost quadrupling since 1995. This was the result in large part to soaring property values and the cashing in of defined benefit pension schemes, but there was also an 11-year post-global financial crisis bull market.
However, in the wake of the coronavirus pandemic, fixed income, equity and property investments have all taken a hit.
In an article for FT Adviser, Sam Liddle a director at Church House Investment Management, suggests this “poses a catch-22 situation for transferring wealth in the UK”.
On the one hand, he argues, retirees looking to transfer wealth to their offspring are likely to be less well-off now than they were pre-lockdown, while many saving for their retirement will have been hit hard in the early months of 2020.
On the other hand, younger generations are more reliant than ever on inheritance and gift transfers because of widespread job losses and the likelihood of a long-lasting recession.
While families looking at ways to transfer as much wealth as possible despite the pandemic may be hopeful for a stock market recovery rally similar to that which followed the Credit Crunch of 2008-09, Liddle warns: “The problem today is that recovery is by no means guaranteed over the short-term.”
With that in mind he recommends savers should proceed warily and adopt a “multi-asset approach centred on capital preservation”. He adds: “With intergenerational wealth transfers reaching record levels and becoming an increasingly important lifeline for beneficiaries, this cautious approach could prove critical.”
Fraser and Fraser remains fully operational and is here to deal with any probate or missing beneficiary queries you may have during this exceptional time. Please do not hesitate to get in touch with business development manager Nick Howitt. We are able to offer all our services remotely and we have secure video conferencing facilities.