According to a new study by the Institute for Fiscal Studies, most wealth held by retired people will be passed on to future generations rather than spent. However, younger generations may not see this wealth until they are older themselves, because people often pass their wealth to their surviving spouse first before it filters down to their children.
In England, those who are approaching retirement aged 55-64 hold £185,000 housing wealth and around £33,000 in other wealth (excluding pensions). The research also found that 80% of over-50s are homeowners and that around one-in-six have a second home. Interestingly, financial wealth seems to be drawn down slowly, with the research suggesting that on average, most people will be drawn down just 31% of their financial wealth between the ages of 70 and 90.
Commenting on the study, Rowena Crawford, an associate director at IFS and author of a set of reports based on the research, said: "Older people do not draw on their wealth much during retirement."
"The majority of homeowners do not move or access their housing wealth, and even financial wealth is drawn down only slowly."
"This means that most wealth held by retired people is likely to be bequeathed to future generations, rather than spent."
"This will have implications for the level and distribution of resources among current working-age individuals, particularly those with wealthy parents and few siblings."
"Given the increased freedom people now have over how they spend their pension wealth in retirement, carefully monitoring how the use of wealth evolves in future will be important, both for the living standards of the retirees themselves and also for younger generations."
Sir Steve Webb, the former pensions minister who was instrumental in bringing in the pension freedom reforms said: "This report confirms that the vast majority of pensioners who have saved through their working life are cautious with their money and leave unspent wealth at the end of their lives."
"This is great news for those who believe in pension freedoms."
"The IFS research suggests that the biggest concern about pension freedoms is likely to be about excessively cautious retirees spending too slowly than it is about reckless retirees blowing their pension savings on lavish living."