A set of new reports – funded by the IFS Retirement Savings Consortium and the Economic and Social Research Council – showed that housing wealth, which averages £185,000 among those aged 55-64, and other wealth averaging around £30,000, is not in general drawn down in retirement.
This implies that most will be bequeathed to later generations, say the reports.
The findings revealed that primary housing was the largest component on non-pension wealth held, with 80% of over-50s being homeowners.
Financial wealth was, on average, drawn down but only slowly.
Observed behaviour suggested that on average individuals will draw down just 31% of net financial wealth between ages 70 and 90.
Even among individuals in the top half of the financial wealth distribution, net financial wealth looks to be drawn down by just 39%, on average.
The reports showed that married people nearly always bequeath only to their spouse, and the surviving spouse most often bequeaths all of their assets to their children.
The findings also implied that inheritances would typically only be received at relatively older age. For example, someone currently aged 40, born to a 27-year-old mother and an older father might, on average, expect to receive a bequest from their parents at age 63.
Rowena Crawford, an associate director at IFS and author of the set of reports, said: “Older people do not draw on their wealth much during retirement.
“The majority of homeowners do not move or access their housing wealth and even financial wealth is drawn down only slowly.
“This means that most wealth held by retired people is likely to be bequeathed to future generations, rather than spent.
“This will have implications for the level and distribution of resources among current working age individuals, particularly those with wealthy parents and few siblings.
“Given the increased freedom people now have over how they spend their pension wealth in retirement, carefully monitoring how the use of wealth evolves in future will be important, both for the living standards of the retirees themselves, and also for younger generations.”
AJ Bell said the thrift was down to worries over unexpected care bills in old age.
Tom Selby, senior analyst, said: “Such thrift will be perfectly sensible in some circumstances, particularly where individuals have relatively small savings pots and choose to hold onto the money to cover any unexpected bills.
“Equally, others will be leaving significant assets untouched in case they need to pay for long-term care as they grow older, while some will simply prefer to pass assets on to loved ones rather than spend them while alive.
“That said, it is likely some of these people are overly worried about running out of money during retirement and are underspending as a result.”
• Following the research, Selectapension revealed its own data showed that fewer women than men had their pension plans reviewed by financial advisers. The findings showed 28% of all cases analysed by Selectapension’s Money Purchase Tool were for women while 72% were for men. Selectapension director, Peter Bradshaw, said: “Despite the regular press and media coverage about the gender gap, not much has changed in the last three years. Increased messaging around early pension saving is helpful, but there needs to be a greater focus on women in the middle of their careers to help them engage with financial advice.”