Young must fend for themselves as inheritance prospects fade

Aug 27, 2013   //   by Keith McDonald   //   Home and Living  //  Comments Off on Young must fend for themselves as inheritance prospects fade

Last month, around a third of renters said they were hoping for a substantial windfall to have any chance of getting a foot on the property ladder. But that’s set to become a distant hope, after 70% of retirees confessed that they are not expecting to leave any significant inheritance for their offspring.

Is inheritance now a thing of the past?

The new 25UP report commissioned by Sanlam Private Investments has found that a number of factors are causing a change in pensioners’ attitudes towards inheritance.

RetireesMore over-65s are concerned with the cost of day-to-day survival than younger age groups, and around half expect that their remaining money will go towards care-related bills in their later years.

Around a third said they had chosen to help their offspring sooner, even if it left them short, rather than building an inheritance to leave behind.

Others, though, are determined to use their money to enjoy their retirement. Remarkably, a greater proportion of retirees than twenty-somethings said that having fun with their money was a major priority.

What this means is that more younger folk will have to prepare themselves for a life without that all-important windfall. And it is likely to come as a shock, the report suggests, with around a fifth of younger and middle-aged people still banking on a sizeable inheritance to follow at some point in the future.

23-27 Years

  • Saving for Specific Event – 41%
  • Buying a House – 36%
  • Surviving Day-to-Day – 34%

48-52 Years

  • Surviving Day-to-Day – 35%
  • Paying off a Mortgage – 30%
  • Building Up a Pension – 24%

65+ Years

  • Surviving Day-to-Day – 38%
  • Preserving Wealth – 34%
  • Funding Future Care – 32%
  • Having fun! – 30%

Top financial priorities for the age-groups surveyed in the report.

Young Must Become “More Realistic About Fending for Themselves”

Ian Porter, Head of Wealth Management at Sanlam Private Investments, believes that retirees are now looking out for themselves because they have been helping their offspring much earlier in life.

In an exclusive video for Which4U (transcripted below), he said that it was important for the younger generation to readjust their expectations and take responsibility for their own future prospects.

I think they feel less obligated to leave money to their offspring for several reasons – the first of which is: they’re very keenly aware of their own potential longevity, so they’re putting themselves first and making sure that they have enough money put aside to look after their needs before thinking about the needs of their offspring.

I think the second factor is that they are/have been more willing to help their children during their own lifetime; for example, covering the cost of university education, a deposit for a first home, maybe even buying a first car, so they think “well, actually, you know, our children have done pretty well out of us already, so now we’re going to look after ourselves. And if there’s anything left at the end of the day, then they can have it…”

I wouldn’t necessarily say that people are being helped out on a continuous basis, but I think they get help earlier in their life, and at maybe a lower level, so the key thing that we’re seeing is parents wanting to maybe clear debts post-university, maybe give a gift towards the cost of a first home, perhaps helping to pay for a marriage, and they’re saying “well, ok, we’ve given you that money now, we’ve given you a start in life. From this point onwards, it’s about us and what our needs are, and therefore if there’s anything left, you’ll get it, but we’re not necessarily going to plan for that to be the case”.

The discussion certainly happened with my parents, where I was told, “We’re helping you with the wedding – that’s it, you know. The rest of it you make for yourself.” But this research that we undertook shows that actually about 20% of those in their 20s are still expecting a significant inheritance from their parents, so that would suggest that actually the frank discussions aren’t happening as broadly as perhaps they should be.

I think the knock-on effect for the younger generation is that they will continue to aspire to the standard of living and retirement that their parents have, but without maybe comprehending that this has come about as a result of final salary pension schemes, as a result of significant house price inflation during the 1970s, which has contributed to that building up of wealth and that’s just not being repeated in the current economic circumstances that we find ourselves in. So they have to be a little bit more realistic about fending for themselves in the future.

The first thing to do is take stock of your finances where they are today, and look at how you allocate your capital and your income to saving versus spending, and if the ratio is vastly in favour of spending, look to try and bring that back towards saving a little bit – because even if you save a little bit, the earlier you save the bigger impact it will have on your eventual retirement fund. So save a little bit, save early, and that will do something to help you along the way.

We’re not advocating that people don’t have fun, of course, in their life. Nobody’s going to follow any advice from me that says don’t have fun with their money, but just think about balancing it, about fun today versus the ability to have fun tomorrow. If you want any further insight into tax rates, allowances, how you can save money, there are some tools available from the Sanlam website (which is, and there’s a useful tax-tables app that you can download onto either an Android phone or an iPhone through either iTunes or the Google Play Store.

Ian Porter, Head of Wealth Management, Sanlam Private Investments

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