The findings of a new report by the Institute of Fiscal Studies (IFS) highlights that the wealth of younger generations is likely to become even more intrinsically linked to their parents’ fortunes, and although that has been the case for time in memorial, the report suggests that, “Today’s elderly have much more wealth to leave their children than their predecessors did, primarily as the result of higher homeownership rates and rising house prices.”
Over the past decade the average wealth of the UK’s oldest households has risen 45%, to around £230,000, and more of those households intend to leave it as inheritance rather than spend it during their lifetime.
It is true that young adults are finding it hard to accumulate wealth of their own due to a combination of unaffordable first time housing, as well as the decline of defined benefit pensions in the private sector, however, making a commitment to investment and pension considerations at a younger age, as well as new ‘springboard’ mortgage products, that are essentially assisted 100% mortgages for younger people, could help redress the balance.
The idea is that the ‘child’ takes the mortgage, with the parent or helper (it doesn’t have to be a family member) putting 10% in a linked bank account for a minimum of three years which accrues interest at 1.5% over the bank of England base rate for 36 months. At the end of that period, and providing the mortgage repayments have been made as scheduled, the 10% can be repaid.
There are many ways that The Financial Planning Group can help your family prepare for the future – our aim is to change the fundamental relationship people have with their money, and to give them confidence and clarity in their own finances.
So, if you are a parent looking at the best way to help your children in the future, or looking for independent advice on your own investment strategy, why not call Steve Padgman on 020 8614 4782 or email Steve.Padgham@fpgonline.co.uk