Are you relying on inheritance to fund your retirement? It might be time to rethink

According to research findings published by FTAdviser, one in five UK adults expect to use an inheritance to help fund their retirement. And yet, fewer than half of those who responded to the survey had discussed inheritance plans with their families.

This suggests a worrying number of people are relying on a retirement income they may not receive, or which could be much less than they’d expected. This may not only result in a financial shortfall later in life, but it could also lead to family disagreements and emotional strain.

In contrast, saving for your retirement independently puts you in control, offering reassuring peace of mind.

So, if your retirement plans are based on an expected inheritance, keep reading to find out why it might be time to rethink your approach and discover practical steps for building independent savings.

Why relying on inheritance could be a risky retirement strategy

Unfortunately, an inheritance is rarely guaranteed. Moreover, if you haven’t talked it through with your family, there could be a gap between your expectations and reality.

As such, building your retirement plan around inheritance assumptions could be risky because:

You might receive your inheritance later than you expect

On average, people are living longer than they did generations ago. The most recent Office for National Statistics (ONS) figures show that the number of centenarians (people aged 100 years or over) in the UK doubled between 2004 and 2024.

These increasing lifespans could mean you don’t inherit until your 60s or 70s, when you may be years into retirement. This might cause financial challenges and make it harder to achieve your goals, especially if you’re planning to use your inheritance in the early stages of retirement, for example, to travel.

You can’t be certain how much you’ll receive

Even if you’ve sat down and had an honest discussion with your loved ones about their intentions, unexpected events and expenses could derail their plans for passing on wealth.

Here are a few reasons why you might not receive as much as you expect:

• High care costs – According to the care options comparison site Lottie, private residential care in the UK costs £1,300 a week on average, while nursing home costs average £1,512 a week. For specialist care or homes in affluent locations, fees may be considerably higher. If your loved one needs this kind of support in later life, the associated costs could significantly reduce their estate.
• Later-life divorce – The number of “grey divorces” (involving people aged 50 and over) is on the rise in the UK. Figures published by Rest Less reveal that between 1990 and 2019, the number of divorces involving people in this age group quadrupled from 9% to 36%. If your parents or other relatives go through a divorce, they’ll need to revise their estate plans, which could affect who inherits and how much.
• Shifts in family relationships – Your loved one is entitled to update their will and broader estate plan at any time to ensure it reflects their current wishes. If your family dynamic changes – due to conflict, divorce, remarriage, new grandchildren, and so on – they might decide to adjust how much inheritance they leave you.

The benefits of building a retirement fund independently

Financing your retirement independently might feel daunting, but it could also be empowering.

Building your own savings pot for the future could give you:

• Control – You stay in control of your retirement plans rather than relying on someone else’s estate and wishes, both of which could change over time.
• Flexibility – Having independent retirement funds gives you the freedom to make decisions – such as when you stop working – based on your needs and goals, instead of waiting for an inheritance to arrive.
• Peace of mind – A self-funded retirement reduces the uncertainty and family pressure that could arise from relying on inherited wealth.

3 steps you could take now to prepare for a self-funded retirement

If you’ve not given much thought to how you’d fund retirement independently until now, getting started might feel daunting.

Here are a few actions you could take now to ease your reliance on inherited wealth:

1. Work out how much your desired retirement lifestyle is likely to cost

Setting a clear financial goal is the first step towards effective retirement planning.

Think about what you’d like your retirement to look like. Perhaps you dream of travelling the world or buying a second home abroad? Maybe your focus is on family, and you’re keen to support your children and grandchildren?

Once you have this picture in your mind, it’s time to crunch the numbers and work out how much this might cost over the length of your retirement. This means factoring in your preferred retirement age and life expectancy; you might find the Office for National Statistics’ life expectancy calculator useful.

Projecting your finances far into the future can be complex. A financial planner can use cashflow modelling to show you how your finances might look in different scenarios and over varying timelines.

2. Check your current pension position

Pensions are one of the most tax-efficient ways to save for retirement, so it’s important to make the most of them.

Review your workplace and personal pensions to get an accurate estimate of how much income these could provide in retirement.

This could help you decide whether your current contribution levels are enough to support your desired lifestyle (along with any other sources of retirement income you expect to have). If not, it might be worth increasing your monthly payments to build a more sustainable pension income.

Remember to check your State Pension forecast too. The amount you receive is based on your National Insurance (NI) record. If you have any gaps, for example, due to career breaks, you might benefit from making voluntary contributions to top up your NI record.

3. Create a realistic long-term financial plan

Our financial planners can review all aspects of your finances and help you create an achievable strategy for reaching your retirement goals – without relying on an inheritance.

We’ll help you keep your wealth as tax-efficient as possible and ensure your savings and investments align with your time horizon and objectives.

If you do receive an inheritance, your financial planner will be there to advise you on how to make the most of it.

To find out more about how we can help, please get in touch by email at helpme@aspirellp.co.uk or call 0117 9303510.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, cashflow planning or tax planning.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Workplace pensions are regulated by The Pensions Regulator.