‘Pre-inheritance’ gaining prominence as 11.6 million receive payouts

22% of adults have received money as an inheritance rising to nearly one in three (29%) among those aged between 65 and 74.

When contrasting the average age of inheritance with the average first-time buyer age of 33, Key says "it is not hard to see" why the idea of ‘pre-inheritance’ has gained prominence.

Parents – who have potentially benefited from buoyant house prices - are most likely to leave the biggest inheritance with an average of £65,600 while grandparents on average leave £24,200. Around 11% of people – around six million - have received an inheritance from their parents while 4% - the equivalent of 2.3 million people - have had cash from grandparents.

The money is being spent wisely with around 34% - around 3.9 million people - investing or saving some or all of the cash. But the property and mortgage market also benefits - around 1.1 million have used the money to buy their first home and 1.7 million have paid off their mortgage thanks to an inheritance. Nearly one in 10 (9%) have even put some or all of the cash in their pension.

More than half (51%) of those who have received inheritances were left money by their parents while a fifth (19%) received cash from grandparents. Around 16% were left money by uncles or aunts and 13% received cash from family friends.

HMRC data shows inheritance tax receipts hit £5.4 billion in the 20/21 tax year, slightly up on the previous year, but receipts from IHT have stayed broadly flat for the past four years thanks in part to the introduction of the Residential Nil Rate Band which allows spouses or civil partners to transfer allowances rising to £175,000 in the 20/21 tax year.

Will Hale, CEO at Key, said: “Intergenerational wealth transfer is a major issue for society as a whole and for the financial services industry and the scale of inheritance shows why that is the case. More than 11.6 million people have benefited from inheritance pay-outs in the past 10 years and the average amounts received can be substantial and potentially life-changing – especially if residential property is involved.

“The idea of inheritance arguably works best when the person receives the support at a time in their life when it can do the most good for their long-term financial security. However, with the average age of inheritance sitting at 47 years old – when people are more likely to have built up assets – we are seeing more conversations happening about providing people with a ‘pre-inheritance’.

“Not only do people benefit from the support when they need it but their older relative is able to enjoy seeing the difference that it has made to their lives. However, getting good financial advice is important to ensure than not only do they not fall foul of inheritance tax regulations but there is sufficient assets to cover potential care costs in older age.”