One in Three See Inheritance as Retirement Lifeline

If parents are comfortable sharing their plans, a family meeting with advisers can be invaluable. It ensures clarity, manages expectations and avoids misunderstandings. I have often seen children banking on inheritances to clear debts, only to discover their parents had very different intentions.

Basing retirement on inheritance is like building on quicksand, it’s too late and too uncertain. The average age of inheriting is around 60, often far too late to buy a first home. Worse, much of that wealth risks being swallowed by care fees of £70k–£80k a year. We don’t build inheritance into client forecasts, though we discuss it, because while £200k may not move the dial, £5m clearly would. The real key is planning. Families should talk openly about intergenerational wealth, using gifts, trusts or life insurance. Passing assets with a ‘warm hand rather than a cold heart’ can make all the difference. And with pensions potentially coming into IHT by 2027, proper planning has never been more vital. Inheritance can support retirement, but it should never replace it.”

Retirement looks daunting at the start but if time is on your side it can be managable. Adding a bit extra to your contributions, taking a more aggressive investment approach and being realistic about when you can afford to retire will help chip away at that target. Relying on an inheritance is risky because you can never tell when it will arrive or how much will be lost to inheritance tax.

As the post war era saw such a boom in house prices and living standard, some baby boomers have a large inheritance to leave behind. As things for recent generations haven’t seen such asset inflation, many are now relying on mum and dad to provide that level of security for retirement. Of course, for those whose parent don’t own property will have a dilema and may continue working into retirement. Auto enrolment is one way the the government are trying to close this gap, but thresholds need to be lowered and contribution rates increased to make a real difference.

Depending on inheritance to fund retirement is a highly uncertain strategy from both a financial planning and behavioural perspective. The timing, amount, and certainty of an inheritance are unpredictable, as assets may be eroded by long-term care costs, lifestyle expenditure, or simply the benefactor’s choice to use their wealth during their lifetime. Intergenerational transfers are often uneven and delayed, which reinforces the importance of building independent provision. Practical steps include maximising workplace and personal pension contributions, making full use of tax free investments such as ISAs, and adopting realistic retirement expenditure models through cashflow planning. In short, inheritance should be treated as supplementary and uncertain. Sustainable retirement plans should be built on pensions, savings, and deliberate financial management, with inheritance considered a potential bonus rather than a core dependency.

Basing a retirement plan on a potential inheritance is a risky strategy that highlights a significant gap in the UK's financial resilience. While it's a tempting prospect, relying on a future windfall that may never materialise—or could be depleted by care costs—is a gamble. The more secure and practical approach for individuals is to actively build their own financial foundation through consistent saving and leveraging pension schemes. Advisers play a crucial role in shifting this mindset by educating clients on the risks and providing a clear, actionable roadmap for a more secure retirement.