Lack of British wills reflects decline in home ownership
PRUDENTIAL have conducted research which shows that nearly 59% of Britons haven't taken out a will, stoking fears that people aren't preparing adequately for the final years of their lives.
The study - produced in collaboration with find-a-financial-adviser service unbiased.co.uk - shows that, even when it comes to over-55s, 36% of people haven't written a final testament.
This represents a 6% increase from the 30% of last year, creating the worry that people are leaving the management of their wealth to the Government's recently changed intestacy laws.
However, contrary to what may have been implied by certain papers, this trend isn't caused by increasing carelessness and irresponsibility.
Rather, it's caused by the decline in home ownership that's been worsening ever since the recession of 2007/8, a decline which itself has been caused by rising house prices and decreasing wages.
Because the percentage of people who own their own homes has decreased since that recession, people have had increasingly less wealth to leave to their loved ones.
For example, in 2008, the rate of home ownership stood at 73.3%. Ever since then, it's been declining, with 2016's low coming in at 63.5%.
This decrease is largely the result of the growing gap between average incomes and property prices, which has taken many people out of the housing market.
It's for this reason that the study is somewhat misleading when it offers a response to the 16% of people who told it they think they're not wealthy enough to have a will.
It replied, "the average homeowner has over £214,000 worth of property alone", suggesting that people are simply not getting around to drawing up a will.
Yet while it may be true that the average home is worth £216,750, this becomes somewhat irrelevant next to the fact that there are fewer homeowners in the UK.
It's actually surprising that more than 16% of the study's respondents did not cite a lack of wealth as a factor in their failure to create a will.
Indeed, it's made all the more surprising by how the study also reported greater numbers of people without wills in areas where there are fewer homeowners.
For instance, it revealed that 67% of people in the north west of the UK - in cities such as Manchester and Liverpool - were without a will.
This is the highest proportion reported by the study, and it corresponds to the lower rate of home ownership in the north west, with the rate in Manchester plunging from 72% in 2003 to 58% in 2016.
Exactly the same rate of ownership also now applies to London, where 64% of people are also without a final testament.
Young and old
Admittedly, 64% doesn't fit precisely with the 42% of adults who don't own property in London. Nonetheless, this larger proportion of people without a will can largely be put down to the fact that younger people are generally less likely than older people to draw one up, but not that much less likely to own a home.
For 18-34 year olds, the percentage of people without a will is 76%. By contrast, the nearest comparable rates of home ownership reveal that 70% of 25-29 year olds and 54% of 30-34 year olds don't own their own home.
In other words, the "will gap" between younger and older people is bigger than the "ownership gap", largely because younger people generally see little urgency in taking out a will while they're still young.
Still, there undoubtedly remains a clear correlation between their lower rates of home ownership and their lower rates of will writing.
Once again, this suggests that the story of declining wills is to a large extent the story of reduced home owning.
As such, it's not especially helpful to say that people should make sure to draw up a will because the average house price has increased to £214,000, since this increase is part of the very problem the study aims to address.
Another worry somewhat exaggerated by press coverage of the research is that people without wills risk having their wealth managed after their deaths according to intestacy rules.
It's very much true that, if we don't have a will, our assets (e.g. house) will be dealt with according to these rules.
However, what's not made entirely clear is that these rules do make sure that, for those with a spouse or civil partner, then their assets and property go automatically to him or her.
Also, for people who have children with this partner, those children will receive half of the remainder beyond the first £250,000 of the estate.
This means that, if an estate is worth £750,000, than a spouse or civil partner will automatically receive the first £250,000. Next, they'll receive 50% of the £500,000 remainder, giving them a total of £500,000. Finally, the children will receive equal divisions of the remaining £250,000, which is held in a trust for them until they reach 18 years of age.
These particular rules came into effect from October 2014, having replaced legislation that gave greater priority to other family members beyond spouses and children.
As a result, if people want certain loved ones to receive a greater share of their wealth than others, then it remains vitally important they create a will whenever they can.
Housing and full time jobs
Of course, as was highlighted above, ensuring that more people take out a will isn't simply about directing them towards a qualified solicitor or to free advisory services like Citizens Advice.
More fundamentally, it's also about the Government doing more to increase the stock of affordable housing and put people on the housing ladder, so that more people can manage to acquire assets that can be handed down to their family.
Fortunately, the rate of house building in the UK reached a seven year peak at the end of 2015, with the 143,560 homes started over the course of the year being 6% higher than the figure from 2014.
However, the homelessness charity Shelter have warned that, as encouraging as this increase is, it still doesn't come close enough to the 250,000 a year needed to make a significant dent in the UK's housing shortage.
Also, the low numbers of people drawing up wills isn't just about the expense of property, but also the stagnation of salaries.
Having dropped by 10.4% between 2007 and 2015, the Government need to do something to stimulate the growth, not just of temporary, "non-standard" work, but also of full time jobs that pay a living wage.
Otherwise, the proportion of the UK population without a will to their name will continue growing for the foreseeable future, no matter how much the average price of a house rises.