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Every GBP1 of wealth transferred between the generations generates GBP1.65 for the UK economy, says St James’s Place

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The UK is on the cusp of a large-scale wealth transfer and it could make a significant contribution to UK GDP, according to new research released today by FTSE 100 wealth manager, St James’s Place.

There is an estimated GBP6.6 trillion of wealth held by those aged 55 years and over in the UK, of which the research suggests some GBP2.8 trillion could be available for transfer over the next 30 years. The study, commissioned by St James’s Place in conjunction with Capital Economics, showed that this age group intend to make nearly a third (32 per cent) of their total wealth – excluding property – available for transfer, meaning approximately GBP920 billion will be gifted to family members over the next three decades. This generosity will not just help those receiving it, but will make a powerful contribution to the economy in the years ahead. For every GBP1 transferred, an additional GBP1.65 will be added to the UK economy.
 
Over the next 30 years, wealth transfer will therefore potentially add GBP677 billion to the economy, or 1.2 per cent of UK GDP each year – enough to fund the purchase of around 3.4 million homes for first time buyers, provide 21.2 million deposits, or pay for 24 million students’ tuition fees.
 
Iain Rayner, Joint Chief Operating Officer at St James’s Place, says: “The economic contribution made by older people in the UK transferring wealth to the younger generations is huge – for every GBP1 transferred, GBP1.65 is generated for the UK economy. On average, 55 to 85 year olds transfer GBP40,000 to their children, grandchildren and family members, mainly for housing, university education or other major purchases. These are serious sums of money and, collectively, represent a vast wave of wealth that our research shows is about to be transferred. This will have a significant impact on the finances of the recipients and the wider economy as this wealth floods into the market.
 
“Families need to think about how and when they intend to make transfers to maximise the impact and achieve the most beneficial tax treatment – and lucky recipients really need to think about how and when to best deploy these gifts to change their lives.”
 
The findings from the St James’s Place commissioned research suggest that the scale of wealth transfer in the UK is set to grow, with the primary reason for transfers aimed as supporting family members with a property purchase.
 
Some 31 per cent of people aged 55 to 85 with GBP50,000 or more in assets have already transferred money to their children (28 per cent), grandchildren (9 per cent) or both – transferring an average of GBP40,000.
 
Looking to the future, 61 per cent of over 55s say they will transfer something in their lifetime; 53 per cent to their children; 29 per cent to grandchildren. Only a third (36 per cent) say they won’t transfer any money in the future during their lifetime. On average, individuals give to their family between the ages of 65-70.
 
Almost two-thirds who had made a transfer (64 per cent) had done so to help with a property purchase; in other cases, money was used for other major purchases (25 per cent); to fund university education (28 per cent); or for general financial needs (34 per cent).
 
Very few survey respondents over the age of 55 with GBP50,000 or more of investable assets say they are concerned about their money running out. Of the roughly one-third (36 per cent) who say they won’t be transferring their wealth in their lifetime, just 13 per cent say it’s because they feel they don’t have enough. Instead, the most common reasons given are that they simply wish to use their wealth to enjoy old age (58 per cent) or, similarly, to maintain their lifestyle (48 per cent).

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