Spending the Kids' Inheritance

With the older generation seemingly richer than ever thanks to generous pension provisions and rapidly rising house prices, it’s no surprise to find so many of them ticking off their ‘bucket list’ by travelling abroad, taking up new hobbies or treating themselves to expensive luxuries.

In fact, the spending patterns of these golden oldies have become so widespread, they have even gained a name of their own. SKI-ing – or Spending the Kids' Inheritance – has become the new normal for the over 50s, replacing the desire of previous generations to leave a legacy for their children and grandchildren.

How rich are Britain's over 50s?

According to a study by SAGA, in 2016 Britain’s over 50s owned almost 70% of the country’s household wealth, amounting to a staggering £6.2trn. What’s more, that figure had risen rapidly, climbing by £660bn in five years. Of the headline figure, pension wealth accounted for £2.52trn and property wealth a further £2.29trn.

However, the days where their children could simply sit back and wait to inherit their share of this wealth are fading fast. These days, more and more older people are deciding to enjoy their money themselves rather than leave it behind for their family.

How have attitudes changed?

Having grown up in relative austerity in the post war years, many of the so-called baby-boomer generation are reluctant to go without in later life just so they can pass on their hard earned savings to their children.

In fact, a study of Attitudes to Inheritance in Britain by the Joseph Rowntree Foundation showed that as many as two thirds of over 50s would rather enjoy their life than worry about leaving an inheritance, with just a quarter saying they would budget their spending in order to leave something behind.

The study found that while most respondents liked the idea of leaving an inheritance, they did not think they should have to be careful with their cash, or cramp their lifestyle, in order to do so.

“As many as two thirds of over 50s would rather enjoy their life than worry about leaving an inheritance.”
- Joseph Rowntree Foundation

SKI-ing is a worldwide phenomenon

Despite the cultural differences in attitudes to inheritance, SKI-ing is a worldwide phenomenon. TD Ameritrade’s Marriage and Money Survey found that 34% of Americans say leaving a legacy is not a priority at all, and 44% say they are likely or very likely to spend their savings on themselves.

It is a similar story down-under, where the Challenger National Seniors Australia report found just 3% of Australians over 50 plan to preserve their savings as an inheritance and only 25% said leaving their family anything was a top priority.

What does this mean for kids?

These days, with people living longer, the chances are that you won’t receive an inheritance nest egg until you are approaching retirement yourself, so fewer younger people are relying on this as a way of funding their lives.

While the Bank of Mum and Dad remains a major financial resource for people buying homes, lending or gifting £5.7bn in 2018 according to Legal and General, with 27% of homebuyers receiving help, a study by Sun Life found that just 5% of people are relying on a legacy from their parents’ will to cover their debts or fund their own retirement.

What do the kids think of this?

With most people settled into their own careers, families and homes by the time their parents retire, they tend to encourage them to enjoy their life with the money they have earned, rather than worrying about leaving anything behind.

“Most people are happy to see their parents having fun with their cash,” according to Sun Life marketing director, Ian Atkinson. “The vast majority don’t see their parents as selfish simply for spending their own hard-earned cash. Just one in ten think their parents are having too much fun at their expense”.

“Most people are happy to see their parents having fun with their cash.”
- Ian Atkinson, Marketing Director, SunLife

A valuable lesson in life

For some, not leaving an inheritance is not so much about having fun themselves, but more about teaching their kids to stand on their own two feet. Take the famous rockstar, Sting, for example. Born to working class parents in Wallsend, Newcastle, he worked his way up to a fortune of around £200million.

Nonetheless, he has told his kids not to expect anything when he has gone. In a frank interview with the Daily Mail, he explained: “They have to work. All my kids know that and they rarely ask me for anything, which I really respect and appreciate. They have the work ethic that makes them want to succeed on their own merit”.

It is a view shared by a wide range of rich celebrities, from Gordon Ramsey to billionaire Bill Gates, who plans to give away his $70bn fortune to good causes rather than leave it to his kids. TV chef, Nigella Lawson sums up the approach perfectly when she says: “‘I am determined that my children should have no financial security. It ruins people not having to earn money.”

What are SKI-ers up to?

These days, retirement is no longer about sitting with your knitting by the fire or pottering around your allotment. Today’s over 50s are an active, vital bunch who see retirement as the start of their next adventure, rather than the end of their active life.

According to the Sun Life survey, 61% of over 50s said they are enjoying life more now than they were when they were younger. 20% have taken up a new hobby, 12% have learned a whole new skill and a huge 43% have visited a new country.

Others enjoy fine wines, theatre trips and dining out, along with more exotic treats ranging from vintage sports cars to overseas sports tours supporting the England cricket team or the British and Irish Lions.

61% of over 50s said they are enjoying life more now than they were when they were younger.
- SunLife survey

The temptation to release equity

Although the over 50s are statistically wealthier than ever, much of this wealth is often tied up in property. The SAGA report says that the average financial wealth of the over 50s – held in bank accounts, savings and investments – is just £69,148.

Compare this to the average property value in England of around £250,000, and it’s easy to see why so many people are turning to equity release and similar schemes to gain access to their true net worth and enjoy their life without emptying their bank account.

However, this can be a really expensive solution. Equity release may seem like a win-win, because you get to stay in your home and still access its value, but with cumulative interest rates on the borrowing, this ‘great deal’ can cost you a great deal more than you think. Your debt could easily double in just ten years and triple in just fifteen years. So if you borrow £50,000 – or 20% of the average property value – to fund your SKI-ing, you could end up owing £150,000 or more, which is around 60%.”

How to start SKI-ing if you're asset rich but cash poor

If you are keen to get out and enjoy the new-found freedoms of retirement, selling up and downsizing (or "rightsizing", as it's more often being called) could be a better option. Sound like hard work? We can help. We can step in and purchase your existing home quickly, helping you make the transition smoothly. This means you can release cash from your property assets fast, without worrying about the mounting debt of equity release.

Some of the proceeds can then be used to downsize your home, leaving the rest free to help you see the world, discover new interests or simply relax in a comfortable lifestyle.

If you fancy having a go on the slopes, you could even try real skiing!

Still not sure if SKI-ing is for you?

Read more about Retirement & Downsizing in our main hub. And learn more about selling your house quickly and easily here.

And you could have that freedom to enjoy retirement in no time at all.