View more on these topics

IFS director: Inheritance increasingly determines wealth in UK

Paul Johnson, Institute Fiscal StudiesA person’s lifetime wealth is increasingly defined by how much they inherit from their family, says The Institute of Fiscal Studies director Paul Johnson.

Johnson believes inheritance in determining an individual’s life chances is probably at its highest since Victorian times.

Speaking at an event run by Seven Investment Management, Johnson argued this will have considerable repercussions for social mobility.

A variety of social factors such as the cost of housing, low returns on investment and government policy have contributed to the financial pressures on young people, he says.

Policies include the triple lock on the basic state pension which has increased 9 per cent compared to average earnings since between 2010 and 2011.

Additionally, the slow rise in the retirement age compared to increases in life expectancy and decline in final salary schemes all mean inheritance has gained greater significance.

Johnson said: “We have a situation where all the risk is on the individual this is a cause for long term concern. The pensions system has worked remarkably well for the current generation of pensioners but that experience will not be automatically transferred to the next one.

“Inheritance is increasingly contributing to life wealth which in turn has consequences for social mobility and therefore inheritance is probably the most crucial factor in determining a person’s overall wealth since Victorian times.”

Successful government policies to get people to save like auto-enrolment could be undone if the amount of wealth transferred through inheritance is unevenly distributed.

He added: “If people get to retirement for example and they do not own their own home and are still renting, then it is a problem. The rent bill will take a massive chunk out of their savings and then they might have to rely on housing benefit which is means tested.”

Johnson said he was unsure how all these extra pressures on public spending will be financed in the future.

He added: “I don’t see a world where spending on pensions and health decreases in any way.  These will have to be paid for by higher taxes and these will come from young people mainly.”

Recommended

Bricks building housing construction
1

IFS questions housing link for Lifetime Isa

The Institute for Fiscal Studies has questioned the thinking behind the new Lifetime Isa, which was revealed by Chancellor George Osborne as part of the 2016 Budget. The new savings vehicle will take the place of the Help to Buy Isa launched by the Chancellor as part of his 2016 Budget, and will offer savers […]

George-Osborne-BW-700.jpg
2

IFS issues warning over Osborne’s tradeable annuities plan

Individuals’ inability to determine whether selling their annuity is value for money is a “serious issue” that could undermine the Government’s plans to develop a second-hand annuity market, the Institute for Fiscal Studies says. In an observation note published today, the IFS says the Chancellor’s announcement that around five million people will be able to […]

Pension-Pensioner-Elderly-Older-People-700x450.jpg
1

IFS: Pensioner benefits to rise £12bn in a decade

Pensioner benefits will cost £12bn more in 2019 than they did ten years previous, the director of the Institute for Fiscal Studies claims. Writing in The Times today, IFS director Paul Johnson says funding defined benefit public sector pensions and the slow rise of the state pension age will cause bills to soar. He says: […]

Money-Coins-Pound-Currency-Close-up-700x450.jpg
10

FOS rules against adviser over pension transfer to access DFM

The Financial Ombudsman Service has told an adviser to compensate a client who transferred their pension to access a discretionary fund manager when they did not need to. In the case, Mr J complains Curo Advisers told him to transfer to a new pension plan to access services from a DFM but then found out […]

1

School fees planning

Jeremy Pearson is Technical Support Manager with Canada Life’s ican Technical Services Team. Canada Life offers a range of wealth management solutions, including retirement income planning, estate planning and investment solutions from a choice of jurisdictions, including the UK, Isle of Man and Republic of Ireland. Many parents value the standard of education offered by […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. It’s quite scary when even supposed non politicians come to the conclusion that a solution to the problem is more tax…

    Nothing like the director of the IFS actually thinking outside the box, is there..

Leave a comment