Don't bank on the wait

By SALLY HAMILTON
Updated:

 

ARE you counting on an inheritance to help see you through your later years? Then get ready for a shock. Legacies will be squeezed by depressed stock markets and the older generation's need to dip into savings and value tied up in their homes to fund retirement or long-term care.

And with people living longer, any inheritance will not only be smaller but could be a long time coming, according to research by Marks & Spencer Financial Services (M&SFS).

It concludes that 18 to-34-year-olds are the financial DIY generation and must face up to the future without expecting handouts from their elders.

The pressures on this group are huge because they are also the debt generation, shouldering the growing burden of student loans and large mortgages.

Add their habit of spending as if there is no tomorrow and putting off having children until a later age and the result is less spare cash to save.

Alan Rensch, technical manager at M&SFS, says: 'The key savings periods of our lives have been hit by changes in society, including student loans, higher house prices and the trend for delaying families.'

The most affordable ages for saving are the late twenties, when the average monthly disposable income is £750, and in the mid-fifties when children have left home and a typical household might have £1,500 a month to spare.

Rensch warns that if the younger generation does not get into the savings habit early, they may have no option but to borrow against or sell their homes in old age. 'They certainly won't be passing anything down to their own children,' he says.

Other pressures on younger people's pockets include divorce and the decline of the occupational pension scheme.

While the majority admit they should be saving, almost half of those under 35 either cannot or do not bother.

Vicky Mitchell is one of the DIY generation who has woken up to the fact that she must provide for herself or face a bleak old age.

Vicky, 28, says: 'In the past you would think parents would leave you something. But my grandparents, who are both in their nineties, are in long-term care and having to fund it themselves, so it is unlikely there will be any money passed on.'

On the advice of her father, Vicky, who works in information technology, joined her company pension scheme as soon as she started work in 1997.

She says: 'I was lucky that I got help from my parents with my student debt. If I hadn't, I think the pension contributions would have been put off for a few years. But with so much uncertainty over jobs in the IT industry I am careful to save a little each month.'

Vicky rents with some friends in south London, but to get on the housing ladder, she has bought a property jointly with her sister in Southampton.

She says: 'Prices are too high in London. My sister lives in Southampton so we bought there and decided to let a room. It was the only way I could do it.'

Donna Bradshaw of independent financial adviser Fiona Price & Partners says: 'There has to be a cultural change so that children do not expect an inheritance.

'Young people believe life is for living and money is for spending. I believe the older generation should feel like that too, rather than be obsessed with passing on wealth to their kids.'

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