Future of an Ageing Population

Policy Implication
Many of today’s older people own their home, giving them some financial
security and allowing them to leave an inheritance. Increasing property
prices and decreasing levels of home ownership in younger generations
could affect this, turning homes from financial assets into financial burdens.
4.7 Housing to enable inter-generational financial transfers
Housing plays a significant role in transferring wealth from one generation to the
next. However, the ageing population and increased longevity are likely to affect
the size of inheritances as well as when people receive them.
Younger cohorts are on course to have lower net wealth than older generations
- this may be the product of falling wages since the recession, however there is
evidence that today’s younger people are less likely to have savings or assets even
when they earn more than older cohorts did at the same age 126 . This indicates that
there may be a generational difference in attitudes towards saving. This may be
driven by the increase in home-ownership in the second half of the 20th century,
which has resulted in more younger people receiving or expecting to receive
some kind of inheritance 19 . Lower savings among younger cohorts may be entirely
rational if they receive their expected inheritances, and these inheritances in turn
could increase their rates of home ownership 19 .
Although there is no definitive measure for judging the adequacy of retirement
savings 19 , the gap between expected and actual inheritance poses a potential
problem for future generations.
As life expectancy increases, there is a greater likelihood of two generations of a
family living until both generations have entered retirement. This means that, even
if people do inherit money and are able to use it to buy their home, they will do so
at a later stage in life. This may leave them with more of the mortgage to repay in
later life. The expected effects of the ageing population on time spent in ill-health
could also significantly affect the value of future inheritances, as people potentially
need more of their assets to fund retirement and care 19 .
Policy Implication
Housing plays an important role in transferring wealth from one generation
to the next. Extending life expectancy and falling home ownership rates are
likely to reduce or negate the value of future inheritances, as housing wealth
increasingly funds longer periods in retirement and ill-health.
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