Many people in the UK are underprepared for retirement. Between the State Pension and auto-enrolment, the majority of people working today will have some level of income in their later years. But whether this is enough to fund a comfortable retirement is another matter. Expectations do not always match reality.
It is no secret that there is a wealth gap, with age being one of the dividing lines. Older people may have benefited from low housing costs, generous pensions, and rising asset values, while younger generations are struggling to buy homes, support families and keep up with the rising cost of living.
Many people want to pass wealth down the generations, with estate planning and inheritance tax reduction high on the priority list for financial planning clients.
But if you are relying on the money that you will inherit, various factors could impact the amount that you will receive and when. You need to carefully consider these when deciding how to factor an inheritance into your financial plan.
The Cost of Living
Prices are rising steadily, driven by the rising cost of basic items such as energy and food. This means that those on a lower income are likely to face a disproportionate increase in their essential expenditure.
Research indicates that a minimum standard of living in retirement costs £13,400 per person, per year, which is more than the current State Pension. A ‘comfortable’ retirement costs around £43,900 per year.
Assuming you need a privately funded income of £10,000 per year on top of the State Pension, you may require pensions and investments of around £250,000-£300,000, depending on investment returns, inflation and how sustainably you wish to draw income.
By comparison, the median defined contribution pension pot for people approaching retirement in the UK remains relatively modest. Estimates vary, but many retirees have pension savings well below £100,000.
Using a sustainable withdrawal rate of around 3%-4%, a pension pot of £60,000 might generate an income of approximately £1,800-£2,400 per year before tax.
This highlights the significant gap between typical retirement savings and the income many people hope to achieve in retirement.
If you are relying on an inheritance to fund your retirement, you may need to adjust your expectations around how much you need versus how much you are likely to receive.
Life Expectancy
Life expectancy in the UK has continued to rise over the long term, although improvements have slowed in recent years. A 65-year-old today can typically expect to live into their mid-80s on average, with many living significantly longer.
This means retirement may last 20 years or more, and there is a reasonable chance that children could themselves be approaching retirement by the time they receive an inheritance.
If you are relying on an inheritance, this creates uncertainty. You won’t know when, or even if, you will receive an inheritance until it is too late to start saving for your own retirement.
Care Fees
Another factor is the cost of care in later life. Anyone with income or assets will need to pay for their own care, whether this is at home or in a residential setting.
Residential care costs in the UK have risen significantly in recent years. A place in a residential care home can often cost £800-£1,200 per week, while nursing care may exceed £1,500 per week, depending on location and the level of support required.
Care provided at home can also be expensive and varies according to individual needs and the number of hours of support required.
Financial help with care costs may be available, but eligibility depends on a means test and differs across the UK nations.
Annual care costs can therefore exceed £50,000- £75,000 in many cases, rapidly reducing savings and investments. In some situations, families may ultimately need to sell the family home to help fund long-term care.
The danger of relying on an inheritance means that it can be tempting to place your own interests above those of the older person and compromise on the standard of care.
Relationships and Family Situation
Even if your family has money and there is no danger of it being depleted by a long lifespan or care costs, you can never be sure you will inherit anything.
Your family member can change their will at any time and could leave their assets to other relatives, friends, organisations, and charities. If you have a large family, or your parent has remarried, you might not receive as much as you think.
Many older people expect their children to be well-established in their careers and financially secure. They may wish to leave money to grandchildren or set up trusts rather than leave everything to their own children.
Remember that regardless of your own situation, your parents (or other relatives) are not obliged to leave you anything. Relying on an inheritance places your future in someone else’s hands.
What Should You Do?
No one can guarantee that you will receive an inheritance or whether it will be enough for you to live on in retirement. It’s important to take responsibility and plan for your own financial future.
Here are some key considerations when planning for retirement:
- Start contributing to a pension as early as possible, even if you can only pay in a small amount.
- Aim to increase your contributions annually.
- Opt into any workplace pension offered, as your employer will pay in as well.
- Remember that pensions are tax-efficient. Contributing to a pension can help to bring your income under certain thresholds and reduce the amount of tax you pay.
- Many long-term investors choose to hold a higher proportion of growth assets, such as equities, during the earlier stages of retirement saving because they have longer to ride out market fluctuations. The appropriate investment strategy depends on your individual circumstances and attitude to risk.
Taking control of your own retirement plans will give you more options in later life.
Please don’t hesitate to contact a member of the team to find out more about retirement planning.
The content in this article was correct on 21/07/2026.
The value of your investment can go down as well as up and you may get back less than the amount invested
A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age).
The Financial Conduct Authority does not regulate Trusts, Tax and Estate Planning
You should not rely on this article to make important financial decisions. Teachers Financial Planning offers advice on savings, pensions, investments, mortgages, protection equity release and estate planning for teachers and non-teachers.
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