I was intrigued and more than a little worried this week by a report about consumer expectations of an inheritance windfall. It turns out many millions see an inheritance windfall as almost guaranteed.

In fact, for many it is seen as a key part of their retirement plans.

It reminded me of just how foolish and short-sighted people can be when it comes to expectations and future forecasts in terms of their own personal finances.

According to a survey by investment platform Hargreaves Lansdown, a third (32%) of UK savers say they expect to need an inheritance to have enough income to live on in retirement.

Just 44% of 2,000 UK savers surveyed said that they would not need to inherit in order to fund their retirement. Younger people were more likely to expect to need an inheritance.

This backs up my own experiences. I recall a few years ago chatting to chap in his late thirties who had fairly recently got married and said he expected his wife’s wealthy parents to eventually deliver a substantial inheritance and therefore didn't need to have a pension plan. I did point out that long term care costs and other costs could wipe out much, if not all, of their wealth but he was not listening.

I’ve heard this from other people too: a belief that an inheritance from parents or other family members will eventually provide a big pay day and potentially fund retirement.

As the survey highlights, this is a widespread view.

Of course, many will receive an inheritance but Ms Reeves clearly has other ideas. It’s entirely possible that many will receive far less than they expect or even nothing at all.

Barring any reliefs that apply, from April 2027 IHT will be applied at 40% on inheritances. This means that on an estate worth £500,000, if the tax-free threshold of £325,000 is applied as it should be, the  Inheritance Tax charge will be 40% of £175,000 (£500,000 minus £325,000). That’s a £40,000 windfall for the Chancellor and £40,000 less for you. Even more will be eaten up with bigger inheritances.

From what I’m hearing, the Chancellor has sparked a mini-boom in Financial Planning on IHT as worried affluent and HNW clients rush for guidance. This will carry on.

There are several issues all this raises. One of them is the lack of co-ordination and planning among families when it comes to inheritance. I wonder how many families have sat down with a Financial Planner or financial adviser of any kind to get advice on tax mitigating ways to pass on wealth after someone dies.

Research by Charles Stanley found that over a third (36%) of Gen Xers aged between 44-59 were in the dark when it comes to knowing about their parents’ inheritance plans and a quarter (27%) of millennials aged 28-43 said they do not know what their parents’ plans were when it comes to inheritance.

Discussing the demise of parents or grandparents is naturally a difficult topic to address but increasingly it must be done if many people are not to be hit with unexpected IHT bills.

Difficult conversations will need to be had before April 2027 to ensure the Treasury does not just scoop up millions of pounds in wealth due to poor planning by consumers.

Consumer must also temper their expectations of IHT windfalls and accept that these are one-off bonuses in life, not a replacement for sensible and comprehensive long term Financial Planning. A robust and carefully thought-out retirement plan is far more valuable than relying on an IHT windfall which may or may not materialise.

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Kevin O’Donnell is editor of Financial Planning Today and a journalist with 40 years of experience. This topical comment on the Financial Planning news appears most weeks, usually on Fridays but occasionally other days.  Email: This email address is being protected from spambots. You need JavaScript enabled to view it. Follow @FPT_Kevin 

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