The UK is on the cusp of a large-scale wealth transfer and, according to new research released today by FTSE 100 wealth manager, St. James’s Place, it could make a significant contribution to UK GDP.
There is an estimated £6.6 trillion of wealth held by those aged 55 years and over in the UK, of which the research suggests some £2.8 trillion could be available for transfer over the next 30 years. The study, commissioned by St. James’s Place in conjunction with Capital Economics, showed that this age group intend to make nearly a third (32%) of their total wealth – excluding property – available for transfer, meaning approximately £920 billion will be gifted to family members over the next three decades. This generosity will not just help those receiving it, but will make a powerful contribution to the economy in the years ahead. For every £1 transferred, an additional £1.65 will be added to the UK economy.
Over the next 30 years, wealth transfer will therefore potentially add £677 billion to the economy, or 1.2% of UK GDP each year – enough to fund the purchase of around 3.4 million homes for first time buyers, provide 21.2 million deposits, or pay for 24 million students’ tuition fees.
Iain Rayner, Joint Chief Operating Officer at St. James’s Place, said:
“The economic contribution made by older people in the UK transferring wealth to the younger generations is huge – for every £1 transferred, £1.65 is generated for the UK economy. On average, 55 to 85 year olds transfer £40,000 to their children, grandchildren and family members, mainly for housing, university education or other major purchases. These are serious sums of money and, collectively, represent a vast wave of wealth that our research shows is about to be transferred. This will have a significant impact on the finances of the recipients and the wider economy as this wealth floods into the market.
“Families need to think about how and when they intend to make transfers to maximise the impact and achieve the most beneficial tax treatment – and lucky recipients really need to think about how and when to best deploy these gifts to change their lives.”
The findings from the St. James’s Place commissioned research suggest that the scale of wealth transfer in the UK is set to grow, with the primary reason for transfers aimed as supporting family members with a property purchase:
- 31% of people aged 55 to 85 with £50,000 or more in assets have already transferred money to their children (28%), grandchildren (9%) or both – transferring an average of £40,000;
- Looking to the future, 61% of over 55s say they will transfer something in their lifetime; 53% to their children; 29% to grandchildren;
- Only a third (36%) say they won’t transfer any money in the future during their lifetime.
- On average, individuals give to their family between the ages of 65-70;
- Almost two-thirds who had made a transfer (64%) had done so to help with a property purchase; in other cases, money was used for other major purchases (25%); to fund university education (28%); or for general financial needs (34%).
Very few survey respondents over the age of 55 with £50,000 or more of investable assets say they are concerned about their money running out. Of the roughly one-third (36%) who say they won’t be transferring their wealth in their lifetime, just 13% say it’s because they feel they don’t have enough. Instead, the most common reasons given are that they simply wish to use their wealth to enjoy old age (58%) or, similarly, to maintain their lifestyle (48%).