- On August 27, 2019
Parents are putting their standard of living in retirement at risk by helping children onto the housing ladder, a new report has revealed.
Collectively parents gave £6.3 billion last year – an average of £24,100 per family – meaning they would rank 10th if they were a mortgage lender.
The report, from Legal & General (L&G), reveals that the average parental contribution to their children has risen by £6,000 compared to last year.
This generosity means that parents are digging ever deeper into their retirement savings leaving many facing a more uncertain retirement.
More than a quarter (26%) of Bank of Mum and Dad (BoMaD) lenders are concerned that they will not have enough money to last retirement after helping their loved ones buy a house.
Some 15% said they will have to accept a lower standard of living, while 6% said they were even planning to postpone their retirement to help their children.
Chris Knight, chief executive of L&G Retail Retirement, said: “There are a vast range of considerations today’s retirees face when it comes to planning their finances.
“Parents and grandparents across the UK want to see their loved ones settled in homes of their own and are giving generously as part of the BoMaD.
“Many are using their pensions and savings to help out and unfortunately this could be leaving some facing a poorer retirement, especially if they don’t get the right advice.”
Mr Knight’s comments were echoed by Andy Pulford, director of Family Estate Planning, who urges clients to be cautious when lending money to family members.
Andy said: “We all want to do the most we can for our children, but in doing so you should always think about your own future as well.
“You may give money now only to regret it in 10- or 20-years’ time when you realise you cannot afford the retirement you had hoped for.
“That’s why sensible financial and estate planning should be an essential part of any decision to become a BoMaD lender.”
The L&G report also found:
- Men are more than twice as likely than women to postpone retirement after helping family or friends on to the housing ladder.
- Women are significantly more likely than men to be concerned they don’t have enough money to last retirement.
- Some 16% of BoMaD lenders have or would release equity and use that money to financially support their children or grandchildren.
Unlocking housing wealth with equity release is becoming more popular with over-55s, according to the report.
“Thousands are still dependant on BoMaD to take their first or next step on Britain’s housing ladder,” continued Mr Knight.
“Retirement is much longer, and much more varied than it used to be. Gone are the days of ‘once and done’ retirement decisions.
“Informed choices in the run-up to, and at the start of the retirement journey can make a huge difference when it comes to being able to fund the retirement people really want.”
Family Estate Planning can advise on all aspects of retirement and financial planning. Please email firstname.lastname@example.org or call Andy on 07984 013533 for an informal chat.