Structural Challenges to Intergenerational Wealth Mobility in the UK: A Pathway for Long-Term Investment

A visual representation of intergenerational wealth transfer in the UK, showing the flow of £5.5 trillion from Baby Boomers to Millennials and Gen Z, with annotations highlighting structural barriers like inheritance tax, education gaps, and housing market bottlenecks.

The UK stands at a pivotal juncture in its economic history, with an unprecedented intergenerational wealth transfer reshaping the financial landscape. By 2025, over £1 trillion in assets-primarily real estate, pensions, and investments-is projected to shift from Baby Boomers to younger generations, with £5.5 trillion expected to transition over the next two decades, according to a Find a Wealth Manager report. However, this transfer is not a straightforward pathway to prosperity. Structural barriers rooted in inheritance systems, educational disparities, and housing market dynamics threaten to erode the potential for long-term wealth creation, particularly for Millennials and Gen Z.

The Erosion of Inherited Wealth

A critical challenge lies in the dissipation of wealth across generations. Studies reveal that up to 70% of inherited wealth is lost by the second generation and 90% by the third, often due to poor financial communication, lack of preparation, and misaligned goals, as reported in an FT Adviser article. Inheritance tax further compounds this issue, reducing the value of transferred assets unless mitigated through trusts or lifetime gifting, according to the Find a Wealth Manager report. For instance, women who inherit wealth after the death of a spouse often disengage from financial advisers, citing a lack of relationship-building or understanding of their needs, as highlighted in the FT Adviser article. This highlights a broader need for advisers to adapt their strategies, prioritizing engagement with the next generation through personalized, trust-based relationships, as the Find a Wealth Manager report suggests.

Education as a Double-Edged Sword

Education disparities amplify structural inequalities in financial mobility. Children from affluent families are significantly more likely to achieve higher educational outcomes, with over 70% of those from the top 10% of households securing five good GCSEs compared to fewer than 30% from the poorest households, according to an IFS report. This educational advantage translates into greater access to higher education and, consequently, larger intergenerational wealth transfers. Recipients of such transfers hold twice the wealth of non-recipients, even after accounting for education levels, as shown in an Oxford Martin School study. However, the UK education system itself perpetuates inequality, with qualitative differences in school quality and subject choices reinforcing class divides, a point repeatedly made in the IFS report. Addressing these gaps requires systemic reforms to ensure education serves as a true equalizer rather than a barrier.

Housing Market Bottlenecks

The housing market epitomizes the intergenerational wealth divide. As of April 2025, Baby Boomers control 56% of owner-occupier housing wealth in the UK, with those over 75 owning 23% of this total, according to the Alan Batt outlook. Limited turnover among older generations-only 1 in 57 Baby Boomers moved homes in 2024-has created a supply bottleneck, exacerbating affordability challenges for younger buyers, as noted in the Alan Batt outlook. While intergenerational support, such as parental deposits, has enabled many first-time buyers to enter the market, this "Bank of Mum and Dad" phenomenon underscores the fragility of financial mobility. Without structural reforms to increase housing supply and affordability, the cycle of intergenerational disadvantage in property ownership will persist, a central conclusion of the Alan Batt outlook.

Data query for generating a chart: A bar graph comparing the percentage of wealth retained across generations (e.g., 100% at generation one, 30% at generation two, 10% at generation three) alongside key factors contributing to dissipation (inheritance tax, poor financial planning, gender disengagement).

The Role of Financial Advisors in Bridging the Gap

Financial advisers and wealth managers are increasingly critical in navigating these challenges. With 87% of inheritors unlikely to retain their parents' financial adviser due to a lack of engagement, as reported in the FT Adviser article, advisers must adopt specialized strategies. These include offering holistic wealth management services, fostering generational dialogue within families, and addressing gender-specific needs. For example, women inheritors often require tailored guidance to rebuild trust in financial systems after disengaging from existing advisers, a trend highlighted in the FT Adviser article. By expanding their role beyond traditional asset management, advisers can help preserve and grow intergenerational wealth.

Policy Implications and Investor Opportunities

For investors, understanding these structural barriers presents both risks and opportunities. Sectors such as affordable housing, educational technology, and financial advisory services are poised for growth as policymakers and private actors seek solutions. Government initiatives, including Homes England's 2024/25 target of unlocking land for 79,000 new homes, are noted in the Alan Batt outlook and signal a commitment to addressing supply constraints. However, public resistance to local developments and the persistence of high rental costs highlight the need for innovative, community-focused investments.

Conclusion

The UK's intergenerational wealth transfer is a defining economic trend of the 21st century. Yet, without addressing systemic barriers-ranging from inheritance tax complexities to educational inequality-this transfer risks entrenching rather than eroding wealth disparities. For investors, the path to long-term wealth creation lies in supporting solutions that bridge these gaps, whether through education reform, housing innovation, or reimagining financial advisory services. As the next generation inherits not just assets but also the responsibility of managing them, the stakes have never been higher.