Retirees in Britain are financially secure, but will any of it benefit the younger generation?

British pensioners are now more financially secure than they ever have been, following the post-election deal between the DUP and Conservative Party, guaranteeing the triple lock pension and winter fuel allowance. More significant is the older generation’s ‘wealth mountain’—the property assets owned by those higher up the housing ladder. Unfortunately for their descendants, it is estimated that just 4 million of the 17 million Brits between the ages of 25 and 44 are set to benefit when their families pass this on.

Millennials, and the generations who will come after them, are heading for murky, uncharted waters. Many won’t be able to buy their own homes, their careers won’t last a lifetime, and now even their family support (in the form of inheritance) could be completely diminished. But how has this come about, and is there anything that young people and their parents are able to do in the short term to ensure that inheritance doesn’t slip between the generation gap?

 Inheritance tax is a problem for the less wealthy

 Today’s elderly have much more wealth to bequeath than their predecessors, mainly as a result of rising homeownership and house prices. The manifestation of the UK’s wealth gap is in who owns a home and who does not, and for many people—the rich in particular—wealth is dependent on the value of a home, or portfolio of properties.

Thanks to consistently unaffordable house prices, the younger generation has been dubbed ‘generation rent’, due to the unlikelihood that they will ever own homes themselves. Inheritance tax might make this more difficult. Though it is intended to help redistribute wealth by taking money from the rich, in reality, it is the less well off who pay the price.

Under current rules, an individual is able to pass on a £325,000 estate tax-free. After that, any wealth is taxed at 40%. Those taxes will have to be paid by the executor of the will within six months of the deceased’s passing. On some occasions, this can leave the executor out of pocket, or even in debt, as they struggle to foot the bill. Executors worried about this can seek help through independent probate valuation—a way of determining how much an estate and its contents is worth, and finding the best way to make gains and pay any taxes. But there are some situations when taxation will be inevitable.

Middle-class homeowners with a house worth even a small amount over than the average house price of £317,000 may end up forcing their descendants to pay taxes that they can’t afford, unless they sell the property, or any property of their own. This chain reaction will leave many of the millennial generation with no property to inherit, and not enough money to buy any of their own.

The current system of inheritance perpetuates inequality rather than reduces it. The only people who will be able to afford property in the future are those who are already well off in the present.

As the inequality of wealth continues to increase, inheritance is key

The ‘bank of mum and dad’, once the saviour of many cash-strapped students, will now determine the future wealth of the younger generation. A study has shown that the richest young people will inherit the most wealth, meaning that the UK’s wealth gap will continue, as it is passed down from one generation to another.

The housing crisis, coupled with the post-Brexit uncertainty of the economy, has potentially changed the nature of home ownership for good. A lack of affordable homes and stagnating incomes are set to make it increasingly difficult for the younger generation to build their own wealth. Just as the country’s brutalist constructions are being torn down, Britain’s houses are no longer machines for living in. Instead, they serve their main function as assets for financial security, assets which the younger generation who are less well off cannot guarantee for themselves.

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