Inheritances set to become more important to wealth, report reveals

People born in the 1980s can expect twice as much of their lifetime income to come from inheritance compared to those born in the 1960s, according to research from the Institute for Fiscal Studies (IFS).

The institute projects that, on average, inheritances will be worth 9 per cent of lifetime household income for those born in the 1960s, rising to 16 per cent for those born in the 1980s

This difference is causing an inter-generational divide, said David Sturrock, senior research economist at the IFS.

“Inheritances are set to become more important in future, widening the gap between those with rich or poor parents. The growing importance of inherited wealth will be a profound societal shift and one with worrying consequences for social mobility.”

The report added that the gap between inheritances from rich or poor parents is expanding. People born in the 1960s can expect inheritances to boost lifetime income by 2 per cent if their parents are from the poorest fifth of households, compared to a 17 per cent boost for those with parents from the wealthiest fifth can get.

Meanwhile, people born in the 1980s with parents among the poorest fifth can expect lifetime wealth to rise by 5 per cent, compared to a 29 per cent rise for those with parents from the richest fifth.

The IFS also expects people born in the 1980s to have roughly £16,000 less saved when they reach the age of 45; with more relying on inheritances, not income, to fund their retirement.

The complete IFS report is available here.