Boomers' vast fortunes to be passed on to Gen X and Millennials in forthcoming years: Reasons why this wealth transfer might not benefit these generations or Britain, as analyzed by ALEX BRUMMER
In the coming decades, an unprecedented transfer of wealth is set to take place across Britain and America, with estimated assets of around £5.5 to £7 trillion in the UK and about $84 trillion in the US. This transfer, known as the Great Wealth Transfer, will bring significant societal changes and economic impacts.
Key societal and economic impacts include:
- Wealth Redistribution Across Generations: Baby Boomers, who currently hold over half of the wealth (UK) and a substantial portion (US), will pass on their assets primarily to Generation X, Millennials, and Gen Z. Generation X, often time-poor and managing mortgages and dependents, are expected to be the immediate beneficiaries, with Millennials and younger generations building on this inherited wealth in the future.
- Changing Wealth Ownership Patterns: In the UK, women are projected to own 60% of wealth by 2025, indicating gender-related shifts in asset ownership. This reflects evolving societal structures and economic roles.
- Financial Planning and Advice Demand: As wealth gets transferred, many heirs may be uncertain how to manage inherited assets, necessitating increased demand for professional financial advice. Early planning is encouraged to manage taxes, debt, investment, and estate planning effectively, which could shape financial services and advisory industries significantly.
- Economic Effects on Markets and Investment: Large-scale inheritance may increase capital flow into markets, properties, and businesses. However, the nature of the transfer—more fragmented, globally entangled, and less documented—creates compliance and regulatory challenges for financial institutions, potentially affecting how wealth is preserved and grown.
- Potential for Socioeconomic Inequality or Mobility: While large-scale wealth transfers can reinforce existing wealth concentrations, they can also enable social mobility if new owners invest in education, entrepreneurship, or new technologies. Nonetheless, disparities remain based on who benefits most and their financial literacy.
- Impact on Compliance and Regulation: The complexity of cross-border and digital assets calls for a modernization of compliance frameworks in financial institutions. Digitized, transparent estate documentation and regulatory adjustments are vital to manage the inheritance process efficiently and fairly.
The Great Wealth Transfer will reshape the financial landscape by transferring vast assets to younger generations, influencing socioeconomic structures, increasing the need for financial literacy and advisory services, and imposing new regulatory and compliance demands on financial systems.
In Britain, the average age of inheritance is now 60 years old, and the best-off among Baby Boomers are twice as likely to pass on gifts to their children compared with those who are still renting in old age. However, inherited money in Britain is often used to pay off debts, rather than for essential expenses like nursery or school fees, rent, or home purchases.
The current Chancellor, Rachel Reeves, has implemented measures that impose inheritance taxes on money saved in private pensions, affecting many Baby Boomers' plans to pass on their assets. Inheritance tax receipts in Britain are projected to reach £9 billion by 2026-27, up from £7.5 billion in the 2023-24 tax year.
Some Baby Boomers are concerned about the rising cost of social care and are delaying passing on their wealth to their offspring. Charles, 61, who has accumulated substantial wealth, believes 'entitlement' from passed-down riches is a dreadful thing.
The young often criticize Baby Boomers for being the 'selfish generation', benefiting from free university tuition, cheap housing, and high asset prices. However, half of the Baby Boomers in Britain now have more than £500,000 in assets, and a quarter have more than £1 million.
In America, more than $100 trillion in assets will cascade over the coming 25 years, with over $18 trillion expected to be inherited within the next five years alone. The implications of this transfer are expected to be equally profound, shaping the economic landscape of America for generations to come.
- As a result of the Great Wealth Transfer, Generation X, Millennials, and Gen Z in Britain and America are expected to become significant wealth holders.
- The demand for financial planning and advice is expected to increase as heirs manage inherited assets, potentially shaping the financial services and advisory industries.
- In the UK, it is predicted that women will own 60% of the wealth by 2025, reflecting evolving societal structures and economic roles.
- The Great Wealth Transfer may accelerate socioeconomic inequality or mobility, depending on how new owners choose to invest their inherited wealth.
- Compliance and regulatory frameworks in financial institutions may require modernization to manage the transfer of cross-border and digital assets efficiently.
- The shifting financial landscape has implications for personal finance, career development, education-and-self-development, and politics, with effects extending to general news, crime-and-justice, and sports.
- In the US, over $100 trillion in assets is set to cascade over the coming 25 years, with over $18 trillion expected to be inherited within the next five years, shaping the economic landscape of America for generations to come.
