As recession erodes family inheritances, Brits face uncertain future

Nearly one in three British adults is banking on an inheritance to help fund their retirement, despite many having never even discussed the issue of inheritance with their parents, according to new research.

And if the economic turmoil continues the inheritance could be significantly lower than expected for many.

The findings by Friends Provident reveal that despite expecting to be left an average inheritance of £64,000, 44% of adults are not concerned about the recession affecting their inheritance pot and retirement savings. But independent figures show average house prices have dropped by £42,500 since August 2007 - which would impact the 61% of Britons who think of property as inheritance.

In addition, despite high expectations when it comes to predicted inheritance amounts, only 14% of adults have actually discussed their inheritance with their families and are clear about how much they'll be receiving. Of the 31% of Britons relying on an inheritance to help fund their retirement, more than a third of them (36%) expect it to fund 50% or more. And 15% of all adults have not even considered yet how they will fund their retirement.

With fewer than 4 out of 10 adults (38%) having spoken to their families to see if an significant inheritance is on the cards, this lack of communication could lead to a shortfall between inheritance expectations and realities. If an inheritance wasn't received, nearly four out of 10 (37%) adults would feel negatively about this, with men significantly more so than women. Despite these negative feelings, nearly half of adults (49%) believe people should spend their money enjoying themselves rather than worrying about providing an inheritance.

The research also identified the rise of the ‘Retired Relatives' with increased longevity meaning many families have two generations of retirees. The research showed that 20% of people aged 66 plus also have parents who are still living. Had they hoped an inheritance would fund their retirement, with their parents still alive and spending, they could be in for a financial shock.

Martin Palmer, head of corporate pensions marketing at Friends Provident, said: "Whether people realise it or not, the concept of inheritance is changing. People may still hope that an inheritance will fund their retirement years but our research shows this can no longer be relied upon. And with more than half of Britons admitting to not saving enough for their retirement, their future comfort is in jeopardy.

"With an over reliance on property, the credit crunch has wiped thousands of pounds off the value of imminent inheritances, and a lack of communication within families around inheritance could also cause a reality or expectation gap.

"In the current climate, it is more critical than ever for people to review their pension savings and be realistic about what finance will be required to fund their retirement. We are urging families to plan for their financial futures now."

The research also found:

If left a substantial inheritance, Britons' top priorities would be to clear their mortgage (41%), put it into savings (40%) and put it towards their retirement (31%)

If they didn't have enough money to retire on, British adults say they would continue working (28%), downsize their property/equity release (23%) or just hope what they have will be enough (22%)
44% of Britons expect to leave an inheritance

Those in the 31 to 35-year-old age group have high expectations when it comes to inheritance as they expect to receive on average £74,500

More people in the North West than any other region (40%) expect an inheritance to help fund their retirement.