New data has suggested that those receiving financial help from their parents are already likely to be on higher salaries, evoking claims that the UK is now an “inheritocracy”.
According to a report from The Times, 41% of the top 20% of earners have received a gift in the past eight years, compared with 13% of the poorest 20%, according to the Institute for Fiscal Studies (IFS).
At the age of 30, just a third of millennials are homeowners amidst stuttering affordability compared with two thirds of baby boomers at the same age.
Naturally, therefore, it is the higher earners who can afford to buy. According to Barclays, the average salary of someone in their 30s is £34,000 a year, yet the typical first-time buyer is on close to £51,000 while the average joint-buying couple makes £72,000.
Also, hard cash is required in London, where the cost of first-time buyer homes is roughly nine times that of starting wages. Indeed Halifax say those trying to enter the city’s housing market are putting down deposits of £125,000, a sum that is frequently unaffordable without help from family members.
As a result, some have referred to the property market as an “inheritocracy,” where up to two thirds of purchases entail some sort of family assistance. Inheritance often occurs later in life, which is a problem for most millennials – the typical 20- to 35-year-old is not anticipated to receive their legacy until they are 61.
Dr Arun Advani, wealth expert from Warwick University, told The Times:
“At this crucial stage of life, when people will be wanting to try to buy a home, the bank of mum and dad plays an outsized role compared with other major developed countries.”
In Britain, a person’s income is influenced by the salaries of their parents to a degree of about 37%, which is greater than the average for most of Europe and just below the US.
According to YouGov, 49% of people believed inheritance tax is unfair, while 21% think it is equitable.
Professor Bobby Duffy, author of the book Generations, told The Times:
“People are very protective of the belief that you can and should be able to pass wealth on.
Deposits are so large that it’s hard to save them from normal income — you need a gift for that, but that’s only going to be an option for the richest groups. All those forces are coming together to mean where you start in life is where you end in life.”