Most people plan to spend children's inheritance

Young couples hoping for an inheritance to lift them on to the first rung of the property ladder have been dealt a blow by research showing that most adults plan to spend their spare cash on themselves, rather than save it for their children.

The survey of more than 2,000 people by the Joseph Rowntree Foundation found that only a quarter of those with the potential to make a bequest said they would budget to leave something for their heirs.

While most people said they would to be able to leave a legacy, half of them strongly agreed that older people should enjoy their retirement and not worry about an inheritance.

Even among those in their eighties, a majority said they would enjoy life, with just a third agreeing they needed to be careful with their money to ensure they left an inheritance.

The family home - once seen as the centrepiece of any will - is no longer immune. Most of those who held a view said they would consider borrowing against their home to release extra money to fund their later years.

The research will be seen as evidence that increasing longevity and a series of crises over pensions have made the older generation more concerned about their finances after retirement.

It also bolsters the view within the advertising industry that the "grey pound" is increasingly important for consumer and leisure businesses.

Karen Rowlingson, joint author of the report and a senior lecturer in social policy at the University of Bath, said: "Although most people would like to be able to make bequests when they die, they are also willing to use up their savings and housing equity if they need the money to maintain a reasonable standard of living. It does not support the stereotype of older people being excessively frugal in order to bequeath everything to their children."

However, she said the research did not endorse the recent image of the older generation - dubbed SKIers or "spending the kids' inheritance" - splashing out on luxuries. Instead it showed that people were planning to draw on their assets over their lifetime as part of a planned process of managing their resources.

"Instead of speculating about SKIers, it is time we started recognising that most older people manage their assets in a balanced way," Dr Rowlingson said.

She said the group of people emerging from the research could be dubbed Owls - older people withdrawing loot sensibly. The survey found the main reasons for releasing equity were to fund repairs and improvements, pay bills or debts, or buy essential items, with very few doing it to pay for luxuries.

The trend has been picked up among the younger generation. More than half felt they were not very likely to receive property as an inheritance.

Less than half of the adults interviewed had made a will, but those aged over 80 were more prudent, with 84 per cent making legal provision. One in four homeowners had not made a will.

The authors, Dr Rowlingson and Stephen McKay of Bristol University, believe poor knowledge of inheritance tax rules could be a reason. Just one in a 100 of those questioned was able to answer correctly a series of questions about the regime.

More than half did not know that the exemption from inheritance tax enjoyed by married people does not apply to cohabiting couples.

Pamela Hawker: 'They don't need my money to be secure'

By Michael Connellan

Pamela Hawker, 50, says she is not concerned about leaving a cash-pot for the children she loves. "They simply don't need an inheritance to be safe and secure."

Mrs Hawker, who lives in Great Shelford near Cambridge, has three children between 16 and 23 with her husband, Brian.

"We've never had savings," she said. "My father was part of the thrifty generation, but those frugal habits are more or less non-existent now."

Mrs Hawker joked about what she calls "King Lear syndrome", explaining: "It's not healthy for kids to know they're going to inherit large sums - it means they're waiting for their parents to pop their clogs." She added: "We've spent £20,000 on putting our first two children through education - these days the inheritance is received while the parents are still alive and kicking."

Her children shouldn't be alarmed: "They should at least be able to divide the house between them. That's unless we decide to be truly reckless."