Grandparents hold collective wealth of over £5 trillion
New research shows the extent of the UK’s intergenerational divide, with Britain’s grandparents having a collective net worth of over £5 trillion – the equivalent of £350,634 each.
While grandparents acknowledge that they are worth more now than their parents were at the same age, most expect their children and grandchildren to be as well off as them when they reach the same age, according to the research from Charter Savings Bank.
Much of this wealth is attributable to being part of the property-owning generation – their homes are worth an average of £225,623, which accounts for almost two-thirds (64%) of the value of their assets. However, many grandparents still have some debts, with one in five grandparents still holding mortgages on their main home and one in three owing money on loans and credit cards
Wealthier grandparents appear to recognise their good fortune and four in ten are either already gifting cash to their children and grandchildren or plan to do so. Three-quarters (74%) plan to pass down their wealth to their children and half (50%) plan to pass down their wealth to their grandchildren.
Paul Whitlock, director of savings at Charter Savings Bank, said: “Baby boomers may be the richest generation ever, but they are optimistic that their families will in time be better off than them. This may be difficult to believe for millennials struggling to reach the property ladder but much of their grandparents’ wealth will eventually find its way to them either through gifting or inheritance.
“While houses are the biggest source of wealth, the savings accumulated by the average grandparent almost match the size of their pensions and investments, demonstrating the role that a healthy savings habit plays in any balanced portfolio. Whether you are lucky enough to be expecting to inherit all or part of your parents or grandparent’s wealth or not, it’s important for people of all ages to make regular cash savings and seek out the best rates to live the lifestyle you aspire to have in later life.”
The rules on gifting:
Gifts between husband and wife are automatically exempt. Gifts to non-married partners, however, and to anyone else, are potentially caught by the rules.
You can give away £3,000 worth of gifts each tax year. Note, however, that the limit applies to you, not to each gift. You can give £3,000 to one person, £1,500 to two people and so on. You can carry any unused annual exemption forward to the next year – but only for one year.
In general, you are safe – within reason – on birthday or Christmas presents or small gifts out of your regular income. If you can prove that giving the gift made little difference to your day-to-day living, then it is probably within the rules.
There are a number of other exemptions. Each tax year, you can give wedding or civil ceremony gifts of up to £1,000 per person, rising to £2,500 for a grandchild or great-grandchild and £5,000 for a child. You can also make payments to help with another person’s living costs, such as an elderly relative, or a child under 18. Gifts to charities and political parties also fall outside the IHT net.
Other gifts are considered to be ‘potentially exempt transfers’. There’s no limit on the value of a potentially exempt transfer, but if you die within seven years, or you retain use of an asset (such as your home), it goes back into your estate. It will then be subject to inheritance tax to the extent it exceeds the various nil rate bands (currently £325,000 for the 2017/18 tax year, plus a £100,000 allowance for your main residence).
Table one: Categories of wealth held by grandparents in the UK
|Categories of wealth||Average amount of wealth held in this category||Total amount of wealth held in this by UK grandparents|
|Family home||£225,623||£3 trillion|
|Secondary properties||£19,121||£275 billion|
|Bank / savings accounts||£29,725||£428 billion|
|Defined contribution pension scheme||£32,652||£470 billion|
|Other physical assets e.g. jewellery, collectibles||£4,945||£71 billion|
Source: Charter Savings Bank 2018