The new issue of Spectator Money is out on Thursday 19 May, and there’s a fantastic array of articles to look forward to. Here’s the editor, Martin Vander Weyer, on what you can expect. The magazine will come free with your next copy of The Spectator, and will also be available to read online at www.spectator.co.uk/money.
Times of political change are also times to think about ‘legacy’. What will Barack Obama be remembered for: his nuclear deal with Iran, his ‘Obamacare’ health programme, or simply his symbolic status as America’s first black president? Is the legacy of Boris Johnson as London’s mayor all about buses and bicycles, or something less tangible but more powerful: the idea that the mischievous maverick is a more effective vote-winner than the polished politician? Is the real legacy of Boris the rise of Donald Trump?
That may be stretching a point. But it should make us think about our own legacies: the disposition of our tangible and intangible assets to the best advantage of our families, and of society at large. In this issue of Spectator Money, Elliot Wilson and Laura Whitcombe focus on the baby-boomer cohort, born between 1946 and 1964. En masse, they are probably the most favoured generation ever born, having lived in an era of peace, prosperity, advancing technology, improved lifestyles and better healthcare. They own homes that steadily increase in value; many enjoy defined-benefit pensions; their life expectancy is considerably longer than that of their parents, and their expectations of comfortable old age are considerably higher than those of their children.
Rising longevity can also be a peril, as Laura Whitcombe explains, because the less ample pension pots will have to be stretched to last for longer. But on the whole, the middle classes on either side of retirement age are now well provided for. And that gives them the luxury of thinking about legacy. At the extreme, for billionaires such as Jeff Bezos of Amazon and Sir Richard Branson of Virgin, that might take the form of investing in space ventures that will take decades to come to fruition — a fashion Matthew Lynn writes about.
At a more mundane level, all parents should think about inheritance planning and whether they are content for the taxman to confiscate a slice of their wealth on death. Jonathan Davis explains the merits of ‘Aim inheritance portfolios’ (selections of Aim-listed shares that benefit from ‘business property relief’, allowing long-term holders to pass them on free of inheritance tax), while Dominic Prince identifies asset classes that are also personal enthusiasms — namely racehorses, fine wine and collectable guns — which can also be passed on without inheritance tax. Which red-blooded heir, we might ask, would not be happy to receive all three?
But legacy should be about more than vanity projects at one end of the spectrum and outflanking the taxman at the other. It should be about lateral thinking and long-term planning, inspired by generosity. What better inheritance could a grandchild receive than the offer by a grandparent to a hard-pressed parent to pay for the child’s schooling? It’s an investment that could be vastly more useful as a contribution to the child’s life than a lump sum in a will, which, when finally received, might make little difference. And even if the offer doesn’t stretch to a full set of Eton fees, a gift of books and travel today may be more valuable than a cheque from the executors in 20 years’ time. As for the Bank of Mum and Dad, what better use could there be of savings that otherwise earn such negligible returns than helping offspring on to the first rung of the housing ladder? In economic terms, it is second only in importance to providing them with a decent education.
Of course, it may be argued that the very existence of the Bank of Mum and Dad and the survival of private and selective schools combine to perpetuate inequality. But who would argue that a generation who have worked and saved and done the right things for 40 years should not be allowed to use what they have accumulated — wisdom and networks as well as money, which is itself only a residue after a lifetime’s taxes — for the benefit of their own families?
The balancing factor required is not punitive tax on wealth and legacies, but more philanthropy. By all means let baby-boomers fund their grandchildren’s gap years; that’s a natural intergenerational flow. But both the tax system and social pressure should also encourage them to open their wallets for good causes, whether it be on the spur of the moment at the kind of charity auctions that Camilla Swift writes about, or on a planned basis in community projects and social enterprises, perhaps contributing some of their expertise as well as their cash. That too is a natural flow towards a better society. Spectator Money is about smart ways to look after your wealth. But you can’t take it with you, and there are so many interesting things you can do with it during your life besides sitting on it and watching it grow. Our message is this: imagine what you would like your legacy to be, and start making it happen now.