Enter the ‘BNTL’ – Better Now Than Later - generation.
Almost one in three investors (31%) with adult children are planning on giving them a living inheritance this year, according to a poll by interactive investor, the DIY investment platform, with one in five of these planning to give a significant £50,000 or more.
With a typical gift in the region of £10,000 to £20,000, interactive investor estimates that the wealth transfer from older adult investors that could take place in a single year, based on these figures, is more than £12 billion*. The poll results strongly suggest that this year could be a watershed year for a great wealth transfer, from ‘baby boomers’ (those born between 1946 and 1964) to their adult children.
More than a third - 39% - said they would gift between £1,000 and £10,000 and 18% said they would gift between £10,000 and £20,000. Most of the recipients are under the age of 50, according to the poll, with more than half (60%) under 35 years old.
Months of pandemic-related savings, particularly among older, wealthier households, together with rising house prices that have simultaneously increased the value of property assets held by older people and made it harder for younger people to get on to the ladder, have created the perfect rationale for offering financial assistance to adult children.
However, there are other reasons to gift to adult children beyond house deposits. A previous poll for interactive investor* found that 28% of parents who had gifted money to adult children had paid into a savings account for them, 23% had paid into an ISA and 10% had opted for the longest-term gift of a pension contribution. There are additional tax benefits to ‘giving while living’ if your estate could be liable for inheritance tax.
interactive investor is calling those planning on gifting living inheritances the BNTL – ‘Better Now Than Later’ generation, in recognition of the realisation many appear to be coming to - that it is better to give when the financial gift is most useful to their children, as well as most tax-efficient, rather than on death.
Becky O’Connor, Head of Pensions and Savings, interactive investor, said: “For those who have done well out of the housing and stock markets over the years and who have adult children who could do with a helping hand now, giving while living is eminently sensible.
“A third of people with adult children who answered our poll – the BNTL or ‘Better Now Than Later’ brigade, are planning on giving living inheritances this year. These are not small sums of money either, with one in five hoping to gift more than £50,000.
“Even if your adult children don’t need the money right now for anything specifically, it might make sense for you to give now rather than later. In which case, setting them up with a stocks and shares ISA or a pension contribution can be a fantastic long-term financial gift, for which they will be thanking you for many years to come.
“It’s important to note, though, that not all people over the age of 60 are awash with cash to give away. Policymakers looking at the difficulties facing younger generations who are trying to accumulate wealth must be careful not to assume that all younger adults are in line for massive windfalls. Some look set for a bit of luck, but others continue to plough on with no inheritance or expectation of any. For this group, building up as much as possible by way of investments and pensions on their own will be the best option, albeit a far slower burn.”
Keeping it in the family
In November 2021, interactive investor launched ‘Friends and Family’, where for just £5 extra a month, ii customers can each gift up to five people a free subscription to ii. That means that five friends and family can each join ii without paying a monthly subscription fee (otherwise £9.99 per month for ii’s core Investor plan). The offer comes with free regular investing, the full range of investments and exclusive, engaging educational guidance and support.
How much are you planning to gift?
Less than £1,000 1.7%
£1,000 to £10,000 38.6%
£10,000 to £20,000 17.7%
£20,000 to £30,000 10.8%
£30,000 to £40,000 4%
£40,000 to £50,000 5.4%
Not planning to gift 1.7%
How old are your adult children?
18 to 25 22%
26 to 30 19%
31 to 35 19%
36 to 40 21%
41 to 50 29%
Tips for giving living inheritances:
- Find out what amount would be helpful to give first, and for what purpose. There may be other non-financial ways of helping to consider too, such as offering for adult children to live at home rent-free for a while.
- Familiarise yourself with the rules for ‘taper relief’ on gifts made within a number of years before death https://www.gov.uk/inheritance-tax/gifts.
- Make sure you can afford to gift the money first before offering it. It sounds obvious, but have you considered if you would have enough should you suffer a health misfortune, or if there was a significant stock market downturn?
- If considering gifting from your pension, take into account your own financial needs in retirement before gifting. The gift has to be affordable to you not just now, but in 20 years’ time, too.
- Listen to interactive investor’s Mind & Money podcast: We need to talk about inheritance.
Notes to editors:
- The poll was carried out among interactive investor website visitors between 7 to 11 February 2022 and received 2,046 responses.
- Poll on the purpose of financial gifts to adult children: https://www.ii.co.uk/analysis-commentary/bank-mum-and-dad-funding-more-home-deposits-ii522442
- *Based on 1.2 million stocks and shares ISA holders over age 55
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.