Intergenerational transfers: the distribution of inheritances, gifts and loans, Great Britain: 2014 to 2016

• Individuals with the most income and wealth were likely to receive the largest gifts and loans, on average.

• Those aged under 45 years were the age group most likely to receive cash gifts or loans from friends and family of the value of £500 or more, and also received the highest amounts, on average.

• Those aged 55 to 64 years were the most likely to receive an inheritance and also received the largest inheritances on average.

• The least wealthy and youngest individuals receive smaller inheritances, on average, but they make up a much larger proportion of their net total wealth.

• Inheritances received by those in the lowest wealth quintile made up 44% of their net total wealth.

• Inheritances from spouses of the recipient had the highest value, on average, and were mainly distributed among those aged 55 years and over.

• Those in the middle of the wealth distribution were the most likely to receive cash gifts or loans from friends and family of the value of £500 or more.

Rising levels of household wealth in Great Britain over recent decades mean that older households today have higher levels of wealth that they can leave to younger generations, either through inheritances, gifts (wealth transfers made during the donor’s lifetime) or loans. As a consequence, gifts, loans and bequests will likely have an increasing influence on household wealth and its distribution in the future. It is therefore important to understand more about their impact on wealth inequality, social mobility and the intergenerational transmission of advantages.

Are inheritances and gifts received predominantly by those who are economically more advantaged? Do they reduce or increase levels of wealth inequality? To help address these questions, this article looks at some of the latest data from the Wealth and Assets Survey (WAS) and other sources.

The analysis in this article primarily focuses on Wealth and Assets Survey (WAS) data covering July 2014 to June to 2016 and refers to this period unless otherwise stated. Some analysis from the Ministry of Housing, Communities and Local Government is also included. Analysis of inheritances refers to those with a value of £1,000 or more and analysis of gifts and loans refers to those with a value of £500 or more, all of which were received in the two years prior to the respondent’s interview for WAS.

Wealth statistics are typically measured and reported on a household basis (Organisation for Economic Co-operation and Development (OECD), 2013). This in part reflects an implicit assumption that all members of a household are able to benefit from assets such as property. However, there are reasons for additionally considering household wealth at the individual level (see Deere, Kanbur and Stewart, 2018). For example, such measures of wealth may make it easier to assess the impact of inheritances and gifts on individuals. This article therefore focuses on the distribution of individual wealth, following an approach by the Organisation for Economic Co-operation and Development.

In this approach, property wealth is split equally between those identified as owners in the survey, while the value of the elements of physical wealth, which are collected at the household level, are split equally between all adults in the household. Further details of the methodology used to create this measure can be found in a note accompanying this article.

Of all adults surveyed during the period of July 2014 to June 2016, 4% reported receiving an inheritance of the value of £1,000 or more at some point in the last two years. In addition, 6% of adults reported receiving a gift or a loan with a value over £500 in the last two years.

The median inheritance amount received by those who reported receiving an inheritance of the value of £1,000 or over in the last two years was £11,000, while the median value of a gift or loan was £2,000.

The age distribution of those receiving an inheritance is quite different from those receiving a gift or loan. Inheritances become more common as individuals age, with a peak in receipt among those aged 55 to 64 years. This is consistent with Gardiner (2017), who estimated, based on parents’ life expectancies, that the most common age at which today’s 20- to 35-year-olds in the UK will inherit is age 61 years (PDF, 482KB).

By contrast, gifts and loans are most commonly received among younger people, particularly among 25- to 34-year-olds, among whom 11% had received a gift or loan above £500 in the last two years. This is also the age group who are most likely to become first-time buyers (PDF, 513.8KB) and are most likely to have children, which may suggest that such gifts and loans are given to help support these expensive life stages.

We can observe how receipts of inheritance vary across the income and wealth distributions. To do this, we divide individuals into five segments or “quintiles”, where the 20% of individuals with the lowest amount of income or wealth are in the first (lowest) quintile and the 20% of individuals with the highest amount of income or wealth are in the fifth (highest) quintile.

The slightly greater degree of inequality can be observed across wealth quintiles, when compared with income. For example, 3% of those in the lowest income quintile received an inheritance of the value of £1,000 or more at some point in the last two years, which was compared with 6% of those in the highest income quintile. However, just 1% of those in the lowest wealth quintile received an inheritance of the value of £1,000 or more, compared with 7% in the highest quintile.

The relationship between wealth quintile and likelihood of receiving an inheritance is perhaps unsurprising, given that older people are more likely to have accumulated greater levels of personal wealth (68% of the top wealth quintile are aged 55 years and over). However, it does highlight that inheritances are more likely to be received by those who already have relatively high levels of wealth, and may already be retired themselves.

In addition to the fact that a higher proportion of those in the highest income quintiles reported receiving an inheritance of the value of £1,000 or more in the past two years, the value of the inheritances they received is also higher, with a median inheritance of £6,800 for the lowest quintile compared with £15,000 for the highest income quintile. This indicates a link between people’s current income and the amount they may inherit (and therefore the wealth of their parents or other relatives), implying low levels of intergenerational mobility.

The relationship between the inheritance received by individuals and their position in the wealth distribution is even stronger than for income. The median inheritance received by those in the top personal wealth quintile was £35,000, compared with £3,000 for those in the lowest wealth quintile.

Our analysis typically focuses on the median as a measure of the average amounts of inheritances received. This is because the median indicates the value for individuals in the middle of the distribution, whereas although the mean is also a measure of average, it can be very different to the median when the data are not symmetrical because of outliers at either end of the distribution. When the data are skewed at either end the mean can be useful to indicate the impact of outliers on the distribution. As the distribution of inheritances is varied with some very high values, we would expect the mean to be greater than the median.

Analysis of the means provides further evidence of the varying strength of the relationship between the amount individuals receive in inheritances and the income and wealth distributions. It also demonstrates the considerable variation in the value of inheritances received within some of the quintiles. For example, the mean value for those in the lowest income quintile was £32,700, which was much higher than the £6,800 median. Those in the highest wealth quintile received a mean value of £58,000.

However, the mean value received by those in the lowest wealth quintile was £8,500. This was compared with a mean value of £92,100 for those in the highest wealth quintile, much higher than the £35,000 median.

However, a different perspective emerges when considering the median value of inheritances received as a proportion of net wealth for each quintile. We can see that while those in the lower wealth and income quintiles were likely to receive less than those in the higher quintiles, the inheritances they received made up a far higher proportion of their total wealth.

For example, on average, inheritances received by those in the bottom income quintile were equivalent to 13% of their net wealth, while for those receiving inheritances in the top income quintile, they were equivalent to 5% of their net wealth on average. This suggests that inheritances could play some role in reducing relative inequalities.

Similarly, while inheritances for those in the top wealth quintile were equivalent to 5% of their net wealth on average, in the bottom wealth quintile this proportion was 44%, meaning that inheritances may reduce relative (though not absolute) differences in wealth.

As highlighted in the Overview section, inheritances become more common as individuals age, with a peak in receipt among those aged 55 to 64 years.

This group also had the highest average value of inheritances over the value of £1,000, with a median of £33,000 among those receiving them. The second-highest value was for those aged 65 years and over, for whom the median was £20,000. This was compared with £4,000 for those aged 16 to 24 years and £5,000 for those aged 25 to 34 years.

While on average, those aged 16 to 34 years were likely to receive smaller inheritances than older age groups, there was quite an unequal distribution of the amounts they received. For example, the lowest 10% of inheritances of the value of £1,000 or more that were received by this age group were valued at £1,000. However, the top 10% of inheritances were valued at £37,500 or more. This is consistent with the pattern for the whole population.

We can also see that those in the higher income quintiles were the most likely among those aged 16 to 34 years to receive an inheritance. For example, 6% of those in the highest quintile received an inheritance of the value of £1,000 or more, compared with 2% in each of the lowest two quintiles. This is broadly consistent with the pattern observed for the whole population.

Those in the highest income quintile were also likely to receive the most from their inheritances, on average. For example, the median inheritance received by those aged 16 to 34 years in the highest income quintile was £8,000, which was double that of the lowest two quintiles.

While younger age groups were likely to receive smaller inheritances than older age groups, the inheritances they received made up a higher proportion of their net total wealth, on average. This is to be expected, seeing as younger people have had less time to accumulate wealth.

For example, the median inheritance of the value of £1,000 or more received by those aged 16 to 24 years was £4,000 and the median proportion of total net wealth made up by inheritances received for this age group was 21%. However, while the median inheritance received by those aged 55 to 64 years was £33,000, the median proportion their inheritances made up of their net total wealth was 7%.

It was those aged 35 to 44 years whose inheritances made up the lowest proportion of their net total wealth, on average. The median value of their inheritances was £8,000 and they made up a median proportion of 5% of their net total wealth.

The generation from whom people receive their inheritance can often be indicative of their value. For example, 67% of inheritances with a value of £1,000 or more received by those aged 16 to 34 years were received from a grandparent or great grandparent. It is likely to be the case that when this member of their family passed away, a larger proportion of their estate would have been received by their parents.

There is evidence of this in that the median inheritance received from grandparents for all ages was £5,000, whereas it was £22,000 for those received from a parent.

Figures 13 and 14 show that 55% of inheritances received by those aged 35 to 54 years were received from a parent generation compared with 62% for those aged 55 years and over.

The source of inheritances that had the highest median value was from a spouse. This was £80,000 and 79% of inheritances from this source were received by those aged 55 years and over. Those aged 55 years and over were also the most likely to receive inheritances from other relatives and non-relatives, with 62% of inheritances from this source being received by this age group. The median value received from other relatives or non-relatives was £10,000.

When we look at what people did with the inheritance money they received, we observe a small amount of variation between the different age cohorts. For example, the most popular action for all age groups was to save or invest it, with 49% reporting doing this with at least some of their inheritance. However, the proportion who did this was slightly higher among those aged 55 years and over, with 53% doing so, compared with 44% of those aged 16 to 34 years.

Correspondingly, the proportion of those who reported spending at least some of their inheritance was higher among younger age groups. Figure 15 shows that around one-third of those aged 16 to 34 and 35 to 54 years spent at least some of their inheritance. This was compared with around one-quarter of those aged 55 years and over.

However, it was those aged 35 to 54 years who were the most likely to use some of their inheritance to pay off debts, with 12% reporting this. This was compared with 8% of those aged 55 years and over and 5% of those aged 16 to 34 years.

Data from the Ministry of Housing, Communities and Local Government (MHCLG) from their 2015 to 2016 First-time buyers report (PDF, 513.8KB) are displayed in Figure 16, and also show that 7% of first-time buyers used inherited money as a source for their deposit. This had increased slightly from 6% in 1995 to 1996 and 2005 to 2006.

Receipts of monetary gifts and loans from family and friends vary considerably across the income and wealth distributions.

Figure 17 shows that the proportion of individuals who received a cash gift or loan of the value of £500 or more peaked among those in the fourth income quintile, from which 8% reported this. Receipts among those in the highest income quintile were slightly lower at 7%, although those in the lowest two quintiles were the least likely to receive gifts or loans, with 4% from each reporting this.

However, we observe that the proportion of individuals receiving a gift or loan followed an inverted U-shaped distribution among the wealth quintiles. The proportion of those receiving gifts and loans peaked among those in the second and third quintiles, from which 7% reported this. Those in the highest wealth quintile were the least likely to receive gifts or loans, with 4% reporting this, slightly less than the 5% of those in the lowest wealth quintile.

The median cash gift or loan amount received by those who reported receiving them in the last two years was £2,000. However, this also varies across the income distribution, with the highest average receipts among those in the highest quintile, with a median of £3,000. This means that not only are those towards the top of the income distribution more likely to receive a gift or loan, but for those who do, their value is, on average, higher.

Similarly, those towards the top of the personal wealth distribution who receive a gift or loan receive a larger amount on average, with a median of £3,100 in the fourth quintile and £3,000 in the top quintile. This means that, while those in these groups are less likely to receive a gift or loan than those further down the wealth distribution, those who do tend to receive a higher amount on average.

When we look at gifts and loans of the value of £500 as a proportion of the recipient’s net total wealth, we can see that the median proportion for gifts and loans was 2%, which is lower than for inheritances. We can see a similar relationship to what we see with inheritances among net income and wealth quintiles. While those in the lower quintiles are likely to receive less in gifts and loans, they are likely to make up a higher proportion of their net total wealth.

For example, those in the lowest income quintile received a median gift or loan of £2,000, and this made up 5% of their net total wealth. However, those in the highest income quintile received a median value of £3,000, which made up 1% of their net total wealth.

This relationship is stronger across the wealth distribution. Those in the lowest wealth quintile received a median value of £1,200. However, this made up 12% of their net total wealth. Then as with the income distribution, those in the top quintile received a median value of £3,000, but this made up less than 1% of their net total wealth.

Of those aged 16 to 24 years, 6% stated they received a cash gift or loan worth £500 or more from family or friends in the past two years. The age group with the largest percentage who received a cash gift or loan was those aged 25 to 34 years, of which 11% did. By comparison, just 1% of those aged 65 years and over reported receiving a gift or loan.

When we examine those aged 16 to 34 years more closely, we can see that it was those in the two highest income quintiles who were the most likely to receive gifts and loans; 16% of those in the fourth quintile and 15% of those in the fifth (highest) quintile reported this. This is compared with 5% of those in the lowest income quintile. The absolute gap between the percentage of those in the two highest income quintiles who received gifts and loans and the lowest three is larger than that for the population as a whole.

The median value received by those aged 55 to 64 years was £1,500, which was the lowest value of any age group. The highest value was for those aged 25 to 44 years, for whom the median was £2,500. Those most likely to receive the highest cash gift or loan were aged 45 years and under.

For those aged 16 to 34 years, we can see that the median amount received in gifts and loans was the highest for those in the highest income quintile (£3,500). However, it is those in the second quintile who received the least, on average (£1,100) when compared with a median value of £2,000 in the lowest quintile. This is broadly consistent with the pattern observed for the population as a whole.

In addition to the fact that younger age groups are more likely to receive larger gifts and loans, what they do receive is also likely to make up a larger proportion of their net total wealth.

For example, the median value of gifts and loans received by those aged 16 to 24 years was £2,000 and the median proportion of net total wealth they made up was 9%. Correspondingly, the median value of gifts and loans received by those aged 55 to 64 years was £1,500, and they made up a median proportion of 1% of their net total wealth.

As well as being the age group most likely to receive a gift or loan, 25- to 34-year-olds were also the age group most likely to become first-time buyers (PDF, 513.8KB) and most likely to have children, which may suggest that such gifts and loans are given to help support these expensive life stages.

Statistics from the Ministry of Housing, Communities and Local Government (MHCLG) show that the average age of a first-time buyer in England was age 32 years in 2015 to 2016.

In addition to this, two-thirds of first-time buyers were in the two highest income bands and 90% worked full time.

The most common source of funding for a deposit came from savings, which has increased in popularity as a source since 2005 to 2006. However, there was also an increase in the percentage of first-time buyers who used gifts and loans from family, from 22% in 1995 to 1996 to 29% in 2015 to 2016.

As has been previously mentioned, there was also an increase in the proportion of first-time buyers who used inheritances as a source. This suggests that a greater proportion of first-time buyers are making use of intergenerational transfers.

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Gardiner L (2017), ‘The million dollar be-question: Inheritances, gifts, and their implications for generational living standards’, Resolution Foundation, London

Ministry of Housing, Communities and Local Government (2017), ‘English Housing Survey 2015 to 2016: first-time buyers’, Crown copyright

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Organisation for Economic Co-operation and Development (OECD) (2013), 'OECD guidelines for micro statistics on household wealth', OECD publishing

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