However, despite the inheritance tax threshold being raised to £1 million, according to our own research at Bower Retirement Services, more people are starting to see leaving an inheritance as something less than essential. As the baby boomers age and begin to enter retirement, a vast change in attitudes and opinions is altering the way our retirees live out their retirement and view things like inheritance. Just as the baby boomers caused a sea-change in politics, culture and popular opinion in the 1960s and early 70s when they represented the youth of the day, as too will they cause a transformation in the way people view retirement and, more specifically, their finances.
Shifting sentiments
Extending the threshold to this 7-digit sum may imply that more money will be left behind for beneficiaries, and this is certainly a possibility. However, according to our research at Bower Retirement Services, our adviser team report that their clients are viewing inheritance as more of a bonus, rather than a necessity. As many as 90% of Bower advisers report that their clients are less inclined to worry about leaving an inheritance as they see their money as just that - their money.
The next generation of retired homeowners represent a generation of rebellion, non-conformity and cultural change, so it is hardly surprising that, when compared to their parents, they have a starkly different attitude to things like money. The change in inheritance tax does lift many homeowners out of this tax bracket, but with the baby boomers feeling that their money is something they wish to spend – and often spend freely – the change may not be of immediate concern to many homeowners.As the years pass and the baby boomers live on into old age, inheritance will likely become even less of an issue as they look to their savings or housing wealth to fund the retirement they envisaged. Products like the lifetime mortgage are being used by the baby boomer generation in record numbers to fund said lifestyle; a lifestyle of financial comfort borne out of the funds locked in their homes.
Living in the now
For those homeowners who would never be in threat of falling into the clutches of inheritance tax, the threshold rise will seem rather irrelevant. For the thousands of homeowners who are struggling through their retirement now, leaving an inheritance is a luxury they cannot afford. This is where equity release can have a real positive impact on the quality of people’s lives.
The majority of homeowners in retirement have (if they have lived in the property long enough) seen their home increase in value a tremendous rate over the years. And so, housing wealth is being seen as an invaluable safety net for those retirees who have seen their pensions return poor returns or have large mortgage shortfalls hanging over them. Equity release products are diverse in their usefulness and can, in certain circumstances, provide a dream holiday for one client, whilst also serving as an essential financial safety for another.
Finally, as the prevailing opinion about inheritance changes, we will see more and more homeowners convert their amassed housing wealth into tangible, tax-fee cash that they can gift to their family members. Here at Bower, we routinely deal with clients who explain that providing their children with an early inheritance to be used for a deposit on their first home, business plan or general giftis the core motivator - as one client poetically put it: ‘I want to give my children their inheritance with a warm hand,not a cold one’. The change in the inheritance tax threshold is certainly a bonus for homeowners, but most of the baby boomer generation will live their life to the fullest before becoming concerned with what’s left behind.
