Substantial financial transfers between living individuals, often referred to as 'inter vivos' gifts, are heavily concentrated among Britain's wealthiest families, according to a new analysis from the Institute for Fiscal Studies (IFS). The report, which examines transfers worth £100,000 or more, highlights a significant flow of wealth primarily from older, richer parents to their adult children, influencing wealth distribution across generations.
The study found that more than half of all large inter vivos transfers are given by households in the wealthiest 10% of the population. While the givers are typically older and more affluent, the recipients, though generally younger and less wealthy than their benefactors, are still more likely to come from wealthier backgrounds than the general population. This pattern suggests that these substantial gifts tend to reinforce existing wealth disparities rather than significantly redistributing wealth more broadly across society.
The average value of a large transfer identified in the report stands at £150,000. These significant sums are often utilised by recipients for major life events, with common uses including contributing towards a housing deposit or paying off existing debts. Around 2% of adults aged between 20 and 60 received such a large transfer during the periods studied, specifically between 2012-14 and 2018-20, indicating that while substantial, these transfers are not widespread across the entire adult population.
The IFS report underscores the role these 'living gifts' play in the intergenerational transmission of wealth. While many families aspire to support their children financially, the current landscape means that those with greater existing wealth are better placed to offer substantial assistance. This has implications for social mobility and the broader distribution of assets within the UK, potentially exacerbating the wealth gap between those with access to family wealth and those without.
Understanding the dynamics of these transfers is crucial for policymakers considering reforms to inheritance tax or other wealth transfer mechanisms. The report's findings suggest that any policy interventions aimed at wealth redistribution would need to consider both transfers made at death and those made during an individual's lifetime to be truly effective in addressing wealth inequality. The concentration of these gifts among the already affluent presents a challenge for equitable wealth distribution.