The great NZ intergenerational wealth transfer will likely amount to about $1.6 trillion between now and 2050 against the backdrop of an aging population and slower growth, a new philanthropic sector report estimates.
Some $27 billion passed on as inheritances in the country last year, the JBWere-produced inaugural ‘Bequest Report’ says, but the annual generational asset hand-over is set to accelerate to approximately $100 billion by 2050 along with a rapid rise in the average age and death-rate of New Zealanders.
“Despite changes to births and net migration in coming years, the largest change in the population formula is the number of deaths, with expectations of the annual number doubling over the next 50 years (mirroring what previously took 70 years and further accelerating what has been a long term trend),” the study says.
“This change is also the main contributor to New Zealand’s slowing population growth with the annual increase falling from 45,220 from 2022 to 19,500 by 2073, and gradually starting to decline later this century.”
Yet any talk of decline is tempered by the fact that NZ remains in the upper echelons of the global wealth rankings as the fifth-richest per median household assets in 2023, for example.
The report notes about 255,000 Kiwis made the grade as US-dollar millionaires in 2022.
“We also rank well on other measures such as happiness. While we have many very wealthy individuals and families, plus many considerably less well off, the gap is far smaller than in comparable countries…”
However, despite their relative wealth and lifetime-generosity, New Zealanders lag comparable developed countries such as the US and UK in leaving charitable bequests – although inheritance taxes play a part in those jurisdictions.
Just 6 per cent of NZ wills include a charity, equating to 1.3 per cent (or $320 million in 2023) of the dollar-value of all inheritances: by contrast, in the US about 10 per cent of wills name a charitable benefactor, amounting to 4.4 per cent of annual generational asset transfers.
“Australia, also without estate or inheritance taxes, is similarly lower,” the JBWere report says. “Our reliance on bequests within overall philanthropy is lower than other countries but that is more reflective of other giving being higher, (e.g. Community Trusts and gambling revenue).”
Nonetheless, the study says a concerted public campaign including education of “influencers such as lawyers, wealth and financial planners” could spark a rise in charitable bequests in NZ.
Raising the bequest proportion of NZ inheritances to just 3 per cent would see the charitable sector receive about $2.4 billion each year.
John Morrow, JBWere Philanthropic Services head, said in a release: “We have an important opportunity to encourage discussions to normalise giving-in-wills, ensuring that future generations and local communities benefit from a culture of giving that goes beyond the present.”
The report, authored by JBWere Philanthropic Services senior consultant, John McLeod, was also supported by Public Trust.