Brexit Causing Legacy Income Growth To Slow Considerably

The UK has been lost in a fog of uncertainty since the referendum result to leave the EU in 2016. Since then, income legacy growth has been slowing.

According to Legacy monitoring specialists, Legacy Foresight, there may be mixed fortunes for charities as difficult economic conditions could deter people from making legacy bequests.

Following the recession of 2009, legacy income shrank by 0.9%. Once the market was back on track in 2013/14, growth in the number of people leaving legacies in their Will rose by 10.8%.

In the intermittent years leading up to the 2016 referendum result, legacy growth had increased at a steady rate of 5.5%.

However, in 2017/18, this figure had fallen to 5% and it is estimated that by the end of the financial year for 2018/19, legacy growth will be languishing at a five year low of just 2%.

Whilst we are all bored of hearing the dreaded ‘B*****’ word, unfortunately, Brexit will be the driving force behind reduced legacy gifts and therefore reduced growth in legacy income over the next five years.

Despite the years that have lapsed since the referendum vote in 2016, the UK government, population and EU member states remain unclear of the shape and relationship the UK and Europe will have following the conclusion of Brexit.

This is already having a noticeable impact on the UK economy with the housing market slowing considerably and in some regions house prices reducing. When the economic consensus agrees that the economy will slow further over the next two years, the UK public may omit legacy gifts from their Wills, or reduce the amount they are able to offer as a gift as the equity and profit in an average home begins to plateau or fall.

Legacy Foresight have predicted the outcome for the charity sector over the next five years in regards to three possible outcomes.

  • They anticipate that there is a 15% chance of a soft Brexit with very few changes to the current customs union. In this case, legacy income is likely to grow at an average of 3.4% over the next five years.
  • The Central Forecast scenario involving a moderate break from Europe is 70% likely and would mean that over the next half decade growth to legacy income will be depressed at 2.2% per year.
  • In the severe case of ‘no deal’ being reached, the economic implications will mean that legacy income will not grow for at least five years.

When it is estimated that legacy income will be worth around £3 billion per year to the charity sector, the difference between a soft Brexit and no deal scenario could be worth £1.6 billion over the next five years.

However, the Office for National Statistics (ONS) have predicted that there will be a significant upturn in deaths in the future which will mean that, based on the current average, the amount of people leaving legacy gifts will increase.

From the low figure of 551,000 deaths in 2011, the most recent figures suggest that registered deaths have increased by 10% to 606,000 deaths and will consistently top 600,000 deaths by 2020.

By 2026, 628,000 people in the UK are predicted to die with this figure rising to 708,000 by 2036. Whilst the amount that is offered in each legacy gift may reduce because of economic forces, it is predicted that the number of legacy donors will increase from 118,000 in the present to 124,000 by 2022.

Have you found that the number of people leaving legacy gifts is beginning to fall? Are people generally leaving a smaller percentage of their estate’s value to charity?