5 reasons why you shouldn’t rely on an inheritance for retirement

For many people, an inheritance is no longer a nice-to-have. It’s a necessity.

In 2025, an estimated 22.5 million people were relying on an inheritance to secure their financial future, as FTAdviser reports.

But staking your financial future on an inheritance can be risky. While you might be expecting a substantial sum, many factors could result in you getting far less than you had hoped – or receiving it too late to meet your goals.

With Financial Planning Today reporting that almost a third of UK savers expect to need an inheritance to afford a comfortable retirement, relying on inheritance in lieu of proper financial planning could have significant consequences.

Read on to discover five reasons why counting on an inheritance to fund your retirement can be risky.

1. Inheritance Tax receipts are rising

2025/26 is expected to be another record-breaking year for Inheritance Tax (IHT) receipts, with the Office for Budget Responsibility (OBR) forecasting that IHT will reach £9.1 billion for the year.

The frozen nil-rate bands are playing a significant role in this increase. The amount donors can pass on before IHT is due is frozen at £325,000, while the residence nil-rate band is frozen at £175,000. These freezes are expected to remain in place until 2030, so the value of your tax-free inheritance portion will continue eroding with inflation.

What’s more, future policy changes could mean higher IHT liabilities for many estates.

From April 2027, unused pension pots will be included in estates for IHT purposes – diminishing the amount that can be passed on tax efficiently. Additionally, the 2025 Autumn Budget is expected to tighten the rules around IHT and gifting, potentially making it more difficult to pass on wealth without paying tax.

As a result, the value of your inheritance is not guaranteed. By the time a donor passes away, there could be even stricter rules in place, meaning you receive significantly less than you had planned for.

2. Your inheritance expectations might not match up to reality

Talking about finances with loved ones can often seem uncomfortable, and discussing inheritance can be particularly difficult.

In fact, Financial Planning Today reports that 36% of Gen X (aged 44 to 59 years) and 27% of millennials (aged 28 to 43 years) are unsure of their parents’ inheritance plans.

Without having an honest conversation, you can’t be confident of how much inheritance you are set to receive. In some cases:

• The donor might be planning to distribute their assets differently to how you expect.
• The estate might not be as large as you think, such as if they have released equity from their home, have undisclosed debts, or have spent their savings.

This can be a difficult hurdle to overcome. You may find the conversation around inheritance uncomfortable, and if your donor is embarrassed by their financial circumstances, they might not be completely honest.

3. If there isn’t a will, you might not be entitled to an inheritance

If, as described above, you haven’t discussed your loved one’s inheritance plans, you might be surprised to discover they don’t have a will in place when they pass away.

In fact, Financial Planning Today reports that over a fifth of baby boomers (aged 60 to 79) don’t have a will.

When someone dies without a will, their assets are distributed according to the rules of intestacy. These rules prioritise spouses and children, before defaulting to other relatives. If no appropriate surviving relative can be found, their estate passes to the Crown.

So, without a will in place, you might not receive the inheritance you’re expecting. In fact, FTAdviser reports that more people are contesting their inheritance entitlement, with the number of probate disputes going to court having risen by 37% over the last decade.

4. The donor’s inheritance plans might change

Even if you’re confident that you are currently set to receive an inheritance, the donor’s plans and circumstances could change before they pass away.

In some cases, they could end up spending more than they had anticipated. For example, significant housing repairs could unexpectedly consume a large chunk of their savings, or they could choose to enjoy more luxuries than initially planned.

Most commonly, the cost of later-life care can wipe out a significant portion of an individual’s estate. According to Carehome.co.uk, self-funded residential care costs an average of £1,298 a week. As a result, some people have to sell their home to pay for their care needs, leaving little left for their beneficiaries.

Additionally, your donor may choose to redistribute their assets in their will, such as if your relationship with them changes, new significant relationships are formed, more children are born into the family, or they choose to donate to charity.

5. Growing life expectancies could delay your inheritance

Life expectancies are growing in the UK. According to the Guardian, in 2023 there were nearly twice as many people aged 100 and over as in 2002.

With many people living longer than previous generations, you may not receive any inheritance until later in life. Indeed, with a Standard Life survey finding that 36% of Gen Z and millennials are neglecting their retirement savings in anticipation of an inheritance, some may end up retiring before they receive anything.

What’s more, living for longer is also likely to erode the value of the estate. Not only will the donor be paying regular living expenses for longer, but they might be more likely to need care for a prolonged period of time.

As a result, you could end up waiting longer for your inheritance and receiving less.

Plan for a comfortable retirement without counting on an inheritance

By making a future inheritance pivotal to your retirement planning, you’re essentially staking your financial future on a pot of money you have no control over.

At J Edward Sellars, we can help you take control by creating a retirement plan tailored to your unique circumstances, preferences, and goals, ensuring you have enough funds set aside to retire comfortably – without depending on an inheritance.

Email enquiries@jesellars.co.uk or call 01934 875 919 to find out more about how we can help you.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, cashflow planning, tax planning, or will writing.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

Equity release will reduce the value of your estate and can affect your eligibility for means-tested benefits.