A new case study from Understanding Society looks at how researchers from the Institute for Fiscal Studies used our data as one of its sources in a report which shows that inheritances are:
- likely to be larger relative to lifetime incomes for younger generations than for previous generations
- set to be larger for those with higher incomes – but likely to be similar for low- and high-income households, on average, as a percentage of lifetime income
- set to drive increasing differences in lifetime incomes and living standards between those with more and less wealthy parents
The IFS divided households into quintiles based on their lifetime net income before any inheritance, and then added the average inheritance projected for each quintile. They found that those in the top fifth of the lifetime income distribution look set to inherit around twice as much as those in the bottom fifth. A household born in the 1970s in the top lifetime income quintile for their decade can expect to inherit an average of £315,000, but a household in the bottom quintile, born in the same decade is projected to inherit £140,000.
For people born in the 1960s, if their parents were in the poorest fifth of the population, they can expect to inherit, on average, about 2% of their lifetime net income. Their contemporaries with parents in the richest fifth of the population can expect to inherit an average of 17% of their net lifetime income.
When the report was released, one of its authors, David Sturrock, a Senior Research Economist at IFS, said: “The increasing levels of wealth held by older generations and the lack of income growth for younger generations are driving an inter-generational economic divide. As inheritances become larger, policies that redistribute inheritances will have bigger impacts on inequality and social mobility, and this should increase the pressure to rationalise inheritance tax.”
Family and householdsHousingIncome and expenditureMoney and financesSocial mobility
