Inherited Homes to Widen U.K. Divide as Richest Benefit MostBy
Heirs to the wealthy are already the highest earners, IFS says
72% of elderly households expect to leave assets after death
A glut of inherited wealth from a decades-long house-price boom is set to worsen inequality in the U.K., according to the Institute for Fiscal Studies.
Young people today are more likely to receive an inheritance than earlier generations, and those that receive the biggest ones are already the most well off, the study showed. Among people born in the 1970s, about 90 percent of the highest earners will receive wealth from dying relatives, compared with about a half of workers with the lowest incomes.
“The wealth of younger generations looks set to depend more on who their parents are than was the case for older generations,” said Andrew Hood, a senior research economist at the IFS. “Today’s elderly have much more wealth to leave to their children than their predecessors did, primarily as the result of higher home-ownership rates and rising house prices. At the same time, today’s young adults will find it harder to accumulate wealth of their own.”
Inequality has been pushed to the fore of economic and political discourse in the U.K. amid speculation that disparity played a role in Britons’ vote to leave the European Union and is being deepened by Bank of England stimulus. Prime Minister Theresa May’s criticism in October that ultra-loose monetary policy had “bad side effects” prompted a fightback by BOE officials who say it is due to more fundamental factors.
While inheritances are becoming more common across the income spectrum, they’re also becoming less equal. The richest half of elderly households in the U.K. hold 90 percent of the country’s wealth after property prices rose sevenfold since the early 1980s.
“It cannot be right that the wealthiest families amass vast fortunes while millions of young people see their incomes fall and home ownership slip out of reach,” said Susan Kramer from the U.K.’s Liberal Democrat party. “Action is needed now to tackle rising inequality, or the gap between those with and without family wealth will grow even wider.”