Over-55s feeling the pinch to help family on to housing ladder, research finds
Parents and grandparents are sacrificing their standard of living to give financial support to younger generations, the study claimed.
Nearly a fifth of “bank of mum and dad” parents and grandparents are sacrificing their own standard of living in order to provide financial support to younger generations getting on the housing ladder, a survey has found.
Some 17% of over-55s who are providing financial help to loved ones will be, or already are, worse off as a result, Legal & General and the Centre for Economics and Business Research (CEBR) found.
One in 10 also said they felt less financially secure and 4% had postponed retirement after supporting family or friends onto the housing ladder, according to the research.
Women were found to be more likely than men to have accepted a lower standard of living after providing financial support.
Parents and grandparents across the UK are often digging deep into their pension pots to support loved ones Chris Knight, Legal & General
People approaching retirement aged 55 to 64 were also particularly likely to be feeling the strain – with money being siphoned from places such as pension pots, downsizing to smaller homes and equity release to help younger generations.
Legal & General calculates that, based on the average contribution by the “bank of mum and dad”, an over-55 household can expect to be £18,000 worse off on average after providing financial support.
The research also found that “bank of mum and dad” lenders were unlikely to take advice in regard to the impact their giving may have on their own financial future.
Before gifting money to help family or friends onto the housing ladder, more than three-quarters (77%) did not speak to a professional adviser or even seek information online.
Chris Knight, chief executive officer, Legal & General retail retirement, said: “Parents and grandparents across the UK are often digging deep into their pension pots to support loved ones, balancing the housing needs of their children and grandchildren with their own retirement goals.
“Worryingly, in the majority of cases, these individuals aren’t taking advice before they ‘lend’.”
He said the financial services sector should re-think how it communicates with people and continued: “It means getting people thinking about retirement income earlier, helping them build their retirement plan and laying out all the options available to them.
“If we can do this, we can help people to be this generous without leaving themselves short – helping their family onto the property ladder, but also ensuring they have the best retirement they can.”
More than 2,000 “lenders” were surveyed for the “bank of mum and dad” research.