Money makes the world go round – and now it is starting to cascade down the generations, too.
Millions of younger Britons, and even those approaching middle age, worry that the great Thatcherite dream of home ownership is impossible for them.
But as so-called Baby Boomers, like me, born between 1946 and 1964 exit the workforce and head into the winters of their lives, the fortunes of our offspring and grandchildren are set to change dramatically.
The numbers are gargantuan. In Britain, more than £5trillion will pass down the generations over the next 30 years, according to investment giant Aberdeen.
In America, more than $100trillion in assets – from property to savings, and fine wines to artwork – will cascade over the coming 25 years, with $18trillion in just the next five years alone.
It’s been dubbed the Great Wealth Transfer – the largest inheritance in history.
Few of us would refuse a hefty bequest – but the sheer magnitude of what’s coming, and how some will win this lottery while others will lose, threatens to reshape society in myriad ways.
Plenty of Britons may feel their financial worries evaporate, with deposits for first homes delivered, mortgages paid off, or their comfortable retirement assured.
But in many families, arbitrary decisions made in wills will lead to bitter, irreconcilable disputes between siblings who feel they deserve a larger slice of the pie. One does not have to be a member of the billionaires’ brigade, as portrayed in the award-winning TV series Succession, to fancy a fight over the spoils.
In Britain, more than £5trillion will pass down the generations over the next 30 years, according to investment giant Aberdeen
The prospect of an inherited fortune also makes a real psychological difference to the way people behave. Anecdotally, some young people are choosing to run up enormous debts knowing that millions of pounds are set to come their way.
One colleague recently told me of an intelligent friend who, upon inheriting a hefty sum of money in his early 40s, gave up his job, bought a nice home and was now ‘bone idle’. He is far from an isolated case.
The risk is that as millennials and Generation X anticipate the wealth to come their way, they will choose a life of leisure, rather than work, joining the nine million people of working age already living on benefits of one kind or another.
My friend Charles, 61, has accumulated substantial wealth running a venture capital fund which backs British entrepreneurs. He believes ‘entitlement’ – the result of passed-down riches – is a dreadful thing.
He is ready to help his three children climb onto the housing ladder and has set money aside to pay the school fees of his grandchildren, if and when they arrive. But the bulk of his fortune is headed for a foundation to support deserving causes and enterprises.
Not everyone is set to share in this inter-generational prosperity. But the Left-leaning Resolution Foundation calculates eight out of every ten adults over 50 in Britain now expect to leave an inheritance of some kind.
And the Baby Boomers are the richest generation there has ever been. In Britain, half of them now have more than £500,000 in assets and a quarter have more than £1million. The best-off among them are twice as likely to pass on gifts to their children compared with those Boomers still renting in old age. It seems clear that, as the transfer gathers momentum, it will exacerbate existing inequalities.
And when that happens, be in no doubt that the shrill calls from socialists for punitive wealth taxes will become ever louder. Some of Labour’s backbenchers are already pushing for such a levy in the next Budget this autumn.
Inheritance tax receipts already shot up to £8.2billion in the year to April 2025, up from £7.5billion in the 2023-24 tax year, and are forecast to hit £9billion by 2026-27.
The moral and economic arguments against inheritance tax are well-worn, and in the run-up to the general election last July, then-Tory chancellor Jeremy Hunt told me that he believed inheritance taxes, charged at 40 per cent on estates above a certain threshold, are a ‘pernicious’ levy which he would strive to see abolished.
His successor, Rachel Reeves, is cut from a different ideological cloth. She wasted no time launching a poorly designed inheritance raid on farms, sparking mass ‘tractor’ protests in central London.
Another of her Budget measures – imposing inheritance taxes on money saved in private pensions – has shattered the arrangements put in place by some Baby Boomers to pass on their assets and will drag many more people into the IHT net.
Instead of handing over money when it is most needed, such as when their children are buying a first home or raising a family, the average age of inheritance in Britain is now 60
One loyal reader is beside himself with anger. He tells me he has directly approached his Labour MP, now a senior minister, in the vain hope that the Chancellor might be for turning. A successful entrepreneur, who sold his business some years ago, he hoped his self-invested personal pension (Sipp) would provide an endowment for his disabled daughter, who is a millennial, and her two children. He has now been advised by his accountant that his savings could face an effective tax rate of 67 per cent, as inheritance tax is charged along with income tax on withdrawals.
Be in no doubt: as this and future governments grapple with a demographic crisis and an inability to fund the bloated welfare state from a shrinking workforce, the tantalising dividends of the Great Wealth Transfer will be first in their sights.
Inheritance is nothing new. For centuries, England’s aristocrats and wealthy mercantile class have made elaborate arrangements to pass on wealth to the next generation – often when their inheritors are still relatively young – moving themselves into the ‘cottage’ at the bottom of the garden.
The approach of the Baby Boomers to the vast assets they hold in their homes and often second homes, however, has proved very different.
The young often gripe that Boomers are the ‘selfish generation’ – they have enjoyed free university tuition, cheap housing, soaring asset prices and, in their later years, ‘triple-locked’ state pensions funded out of direct taxation.
Yet even as they benefited from these benign conditions, many Boomers are enjoying far greater health and longevity than their parents and grandparents did – and are often proving slower to pass on their wealth to their offspring.
Some, no doubt, are concerned about parting with their resources too early, fearing the need to conserve cash to meet the surging cost of social care. Others are quite happy, and have every right, to spend their money on cruises and first-class travel.
Yet the social cost of this can be profound. Instead of handing over money when it is most needed, such as when their children are buying a first home or raising a family, research shows the average age of inheritance in Britain is now 60 years old.
Instead of the Great Wealth Transfer paying for nursery or school fees, rent or other essentials, the most common use made of inherited money is to pay off debts incurred during the middle years, including credit card bills and mortgages.
Given how much harder it is for the young to buy their own homes – even among the top third of earners in Britain, home ownership is down from 74 per cent to 51 per cent during the past 20 years – those Boomers planning to hand money to their children would be better to do so sooner rather than later.
Financial crises aside, the Great Wealth Transfer is likely to be the most profound economic event of the next 20 to 30 years. It’s clear that these conversations are only just getting started.
