Tory peer calls for £10,000 ‘civic inheritance’ for all 30-year-olds

Ministers should hand out a £10,000 “civic legacy” to all 30-year-olds amid concerns that a £1.5 trillion wealth transfer to millennials will worsen inequality, a Tory peer has urged.

David Willetts, head of the Center for Generations think tank, has called on the next government to implement a major new policy to distribute wealth across the UK.

Research shows parents whose assets have increased due to soaring house prices and final salary pensions will leave their Millennial children around £150,000 each on average.

Although annual inheritance transfers are expected to increase by a third to £145 billion by 2033, one in 10 millennials will still receive nothing. By comparison, analysis by the Institute for Fiscal Studies (IFS) for the Guardian found that the top 10% of earners would receive more than £500,000 each, if not more.

Another analysis this week by real estate agent Knight Frank said that over the next 20 years, in the United States alone, $90 trillion of assets (largely driven by rising home prices) will be lost to the silent generation, Fluid between Baby Boomers and Millennials. This would make wealthy Millennials the “richest generation in history.”

Many in the generation born between 1980 and 1994, who have been derided by some for splurging on gourmet coffee and avocado toast, have experienced wage increases despite claims that Millennials are about to get rich. Slow, rising rents and dashed dreams of homeownership.

However, the huge sums of money inherited by new generations may lead to a shift in the way money is invested, Research This suggests that Millennials are more comfortable holding cryptocurrencies and assets that provide social and environmental benefits.

Millennials will certainly benefit from having fewer siblings to share in the windfall than their parents did – 1.8 compared to 2.5 for those born in their 60s. But most people shouldn’t get excited about early retirement. The IFS says the typical age at which they inherit is 64 – an age when the Beatles would be comfortable renting a cottage on the Isle of Wight and having your grandchildren on your lap.

Willetts said: “Whether you are Conservative or Labour, in a world where inheritance is more important and income is less important, society is less open and social mobility is less.”[Inheritances are now] People show up very late in life. It will reinforce a pattern of inheritance that benefits grandchildren. We will have some very wealthy heirs, and an increasing number of people not getting on the housing ladder and renting until old age. “

Without reform, a key consequence of the way inheritance is transferred will be widening inequalities. The IFS said that for millennials from the poorest quintile of households, inheritance would increase lifetime earnings by only 5%, while those from the richest quintile would increase their wealth by 29%. . That could mean a surge in inheritances will also deepen the wealth gap between people in the north and south, where property values ​​are growing at very different rates.

For example, Millennial friends who studied together in college and have enjoyed similar financial circumstances for much of their careers may find that their wealth differs significantly when they inherit, creating tension in social relationships. If their parents owned a house in London, they would have earned an average of £254,000 over the past 15 years of house price growth. But if their parents had owned a house in the east or northwest of England, the windfall would have been at least three times smaller.

Inheritance mobility may exacerbate inequalities between whites and black African, Caribbean, Pakistani and Bangladeshi origins, who are already half to one-third as likely as whites to receive a lifetime gift from their parents, which may It’s because they’re not that rich.

Mr Willetts said too little had been done to distribute wealth since the 1980s when the council’s right-to-buy scheme and utility companies such as BT were privatized. He revived the idea of ​​civil succession after first raising it six years ago.

Similar ideas have been floated by the IPPR think tank, which is seen as increasingly influential in the Labor Party.

Willetts said the problem could be solved by lowering the inheritance tax threshold (effectively £1m in many cases), abolishing exemptions and reducing the current 40% rate.

Funding for inherited assets has been growing rapidly in recent years. IFS senior research economist David Sturrock said households headed by over-70s have on average 20 per cent more wealth than the same group a decade ago.

“Work income growth is slow, so the amount [in inheritances] It’s a more important part of your life’s resources,” he said.