We document key patterns in the flow of significant gifts and loans between friends and family in Great Britain, using newly-available data from the Wealth and Assets Survey. We identify a number of new stylised facts. Gifts and loans are generally intergenerational transfers: 83% of the value of gifts and 68% of the value of loans is made by parents to their children. Transfers increase inequality in economic resources over the early years of adult life. Over an 8-year period, cumulative transfers received are worth 0.5% of income for those in the bottom quintile compared to 2.6% of income for the top quintile. By contrast, they are larger as a share of current wealth for those with lower wealth levels, illustrating the importance of heterogeneous savings rates. Transfers strengthen the transmission of inequalities across generations. More than half of the value of gifts is given by the wealthiest fifth of individuals, and transfer receipt widens the gaps in resources between those with higher and lower socio-economic status parents in both absolute and percentage terms. There are substantive differences in the receipt of transfers by region and ethnicity. While much of the regional differences in giving appear to be driven by regional wealth differences, those in the South of England are substantially more likely to give gifts for a given wealth level.

Understanding the drivers of wealth transfers during life is crucial to understanding the intergenerational transmission of inequality, the optimal design of social insurance, and the efficacy of expansionary fiscal policy. To shed light on this, we analyse the relationships between giving and receiving significant wealth transfers and experiencing key life events. We use newly-available data from the UK Wealth and Assets Survey to investigate recipients' self-reported transfer use, alongside measures of life event transitions contemporaneous with transfer receipt. Our findings suggest that substantial intergenerational transfers help recipients to make consumption or investment decisions with a up-front fixed cost, like moving into homeownership, rather than providing intra-family insurance of shocks. This is particularly the case for those with more affluent parents.Events in givers' lives, including receiving an inheritance and being widowed, also have the potential to explain a substantial share of transfers made. Becoming a widow is strongly associated with an increased likelihood of making a transfer, but this is not the case for new widowers, consistent with gender differences in preferences for making transfers.

Key findings1. In 2019, around 40% of 20-to 59-year-olds had less than £2,000 in financial wealth (combined with their partner if they had one). Those who are younger, have lower income, and rent rather than own their homes are more likely to have low savings -but having low savings remains common in the middle of the income distribution. 43% of working-age people in the middle of the income distribution have less than £2,000 saved. Between 2012 and 2019, though, the proportion of people with low financialwealth (less than £2,000) was falling -from 47% of the working-age population in 2012 to 40% in 2019. This fall was concentrated among relatively less financially resilient groups -people who were younger and people who rented, rather than owned, their homes. These more vulnerable groups have been increasingly likely to have a financial safety net.3. Notwithstanding this fall, having low savings tends to be a persistent, rather than temporary, condition. 70% of those with low financial wealth in 2018-20 had had low savings for the last four years. This is especially concentrated in the most vulnerable groups. The lowest-income, least financially literate, and leasteducated groups, holding other factors constant, are more likely to have persistently rather than temporarily low savings levels. In contrast, higher-income adults, those with degrees, and those with higher levels of financial literacy are more likely subsequently to move out of having low financial wealth. This suggests that increasing levels of financial literacy in the population could help people build up savings levels.4. Nearly a fifth of those with financial wealth worth less than a month's income report that they would be unable to meet an expense of a month's income, even considering other forms of 'insurance'. They say they would be unable to borrow money, or to ask friends or family for help. Even in the middle 60% of the income distribution, 11% of those with low financial wealth would be unable to meet an expense of a month's income. This represents around 1 million middle-income adults. 5.A key reason to hold financial wealth is to protect one's standard of living during an economic shock. We looked at the experience of the start of the COVID-19 pandemic as a large, adverse economic shock that affected millions and saw to what extent a stock of financial wealth protected people from hardship. Having low levels of financial wealth notably increased people's risk of fallinginto financial difficulties in the early months of the pandemic. Among those who became unemployed, were furloughed, or were self-employed and lost all work, those with no financial wealth were 6.3 percentage points more likely to fall into arrears on their household bills in April 2020, and 6.7 percentage points more likely to in May 2020, compared with those with at least a month's income's worth of savings.7. Amongst those with low levels of financial wealth (some, but less than one month's income's worth), there was no increased risk of falling into arrears by April 2...

This report gives a new and up-to-date picture of the giving and receiving of significant intergenerational wealth transfers during life, summarising the findings of two research papers.New data from the Wealth and Assets Survey (WAS) allow us to build a comprehensive picture of the flow of wealth transfers made during life. The WAS asks about the giving and receiving of gifts and loans worth £500 or more between friends and family. We examine the change in patterns of giving over time, who gives and receives transfers, the contribution of these transfers to early-adult-life economic inequalities, and the events associated with giving and receiving wealth transfers during life. Key findings1. Over a two-year period, around 5% of adults receive a substantial gift and 2% receive a substantial loan, from friends or family. Over an eight-year period in adults' 20s and early 30s, around 30% receive at least one transfer. Gift receipt has become slightly more common since 2017 but there is no strong trend of larger amounts being transferred over time.2. Transfers are very unequally sized. The median gift and median loan received are both around £2,000 but the 10% largest transfers are over £20,500. The largest 5% of transfers made up more than half of the total value of transfers received over 2018-20.3. Substantial transfers during life are mainly gifts, rather than loans. The annual flow of gifts is around four times the value of the annual flow of loans. In total, these lifetime transfers are around a fifth of the size of the annual flow of inheritances.4. These transfers overwhelmingly represent gifts from parents to their adult children, with parents giving 83% of the value of gifts and (great-)grandparents contributing just 3%. Some parental giving could be inheritances passed straight on to children, but only 3% of the value of inheritances directly received is matched by a contemporaneous gift being given. Transfers increase inequalities in resources in early adulthood, though theirdirect impact is modest. The lowest-income fifth receive on average £30 per year in transfers, worth 0.5% of income, during their 20s and early 30s. This compares with £790 per year, or 2.6% of income, for the highest-income fifth. Patterns in the giving and receiving of lifetime gifts and loans The Institute for Fiscal Studies, February 2023 4 14. Those with different levels of wealth and from different parental backgrounds report using gifts in different ways. Those with homeowning parents are particularly likely to report using a gift for property purchase or improvement. Those in the bottomwealth third are more likely than those who are wealthier to report using gifts for the purchase of a new car or driving lessons (16% of the total received), to pay off debts (12% of the total) or for educational or family expenses (10% and 7% of the total, respectively). This differing use of transfers is likely to have knock-on impacts on inequalities in wealth and living standards later in life.15. Gifts and loans also appear to be made in ...