The UK’s Office for National Statistics (ONS) has found that nearly one in five Brits (17%) are looking at their inheritance to cover the cost of retirement.
In its Wealth and Assets survey, the ONS revealed that among those aged 65+ nearing retirement, over a third do not believe they will be able to maintain an equivalent standard of living in later life.
Talk about money
Alex Price, director of financial planning at Charles Stanley, said that even through people are counting on the money that is going to be passed down from family and relatives, this doesn’t mean they shouldn’t talk about it.
“As the cost of retirement soarsn it’s unsurprising that 17% of adults plan to use their inheritance for later life,” Price said.
“Our own research shows a similar pattern, as we look set to receive an average inheritance of £78,000 ($100,268, €85,488) from our parents, with one in seven already mentally spending it and earmarking the cash to fund retirement costs.
“However, this significant transfer of wealth is rarely talked about, with just a fifth of adults admitting that their family discusses inheritance, risking bigger inheritance tax bills than are necessary.
“It’s important that families have the ‘money talk’ so they can plan ahead and as much of their hard-earned money as possible is passed on to loved ones so they can make the most of it.”
Equity release
But people are not only looking to their prospective inheritance to fund their retirement.
According to Jim Boyd, chief executive of the Equity Release Council, many people are considering drawing on the value of their property to ensure a comfortable retirement.
“This data highlights a looming later life funding crisis on the horizon, as a third (37%) of consumers aged 65+ are not confident they will be able to maintain a standard of living in retirement.
“As consumers seek to understand how best to support their standard of living over ever longer retirements, our research shows homeowners are increasingly looking to their property wealth, with 51% of homeowners aged 45+ viewing money invested in property as part of their later life plans,” he added.
“This is hardly surprising when one considers rising pension incomes have stalled, with the average pensioner’s weekly income just £7 higher in real terms than in 2009/10.
“At the same time income from property holds significant potential, with the average homeowner in England and Wales able to unlock around £88,290.”
Education and planning at the forefront
Boyd believes that pensions alone are not fit to cater for retirement needs anymore, and with increasing longevity, people need to turn to other options that can feed into their later life income streams.
This is where seeking financial advice and planning becomes paramount.
“Pensions cannot work in silo to fund longer lives and the intensifying strain on households highlights the urgent need for a more joined-up approach towards how people plan financially for retirement that considers a range of assets.
“Educating consumers on what sources of funding are available to them is vital, as well as the safeguards and protections in place if they choose to access property wealth in later life.”
