The Bank of Mum and Dad (BOMAD) desperately needs financial advice and guidance, equity release advisor Key has found.
Over three quarters (76%) of all parents aged 55 and over found gifting rules complicated and were concerned about making mistakes, with nearly a quarter (24%) worrying that they don’t have the financial knowledge to make the right financial decisions as the Bank of Mum and Dad.
With industry estimates showing that more than one in four housing transactions in the UK are financed by The Bank of Mum and Dad, Key’s research indicated that the over 55s are looking for additional help and guidance in this area.
Dean Mirfin, chief product officer at Key, said: “Collectively BOMAD is a major UK financial institution but one that needs advice and guidance so that parents feel empowered to make the right financial decisions for themselves and for the next generations.
“Older homeowners in the UK own as much as £1 trillion in housing wealth according to our estimates and are also likely to have generated significant pension wealth as well as other retirement savings.
“The challenge for parents wishing to lend or gift money is to decide which assets are the most appropriate and most tax-efficient for gifting. We believe advice is key.
“The over 55s are right to demand increased guidance and support and it’s no surprise that the vast majority would support tax incentives providing the money is used for major life events, such as a first property purchase, university fees or debt repayment.
“At Key, we would support any initiatives which give clearer guidance to the Bank of Mum and Dad about the important intergenerational financial decisions.”
In fact, two-fifths (40%) of parents aged over 55 believed there needs to be more support to help the Bank of Mum and Dad by offering online guidance.
In addition, 78% of the over 55s would welcome tax incentives for gifting to children providing the money is used for major life events, such as a first property purchase, university fees or to clear debt.
Concerns around how financially savvy older parents’ are was raised as an issue by the younger ‘generation rent’ too.
Nearly half (46%) of those 18-40 year olds living in rented accommodation worried that their parents potentially don’t have sufficient financial knowledge to make the right decisions as Bank of Mum and Dad, and are concerned about a lack of support to help their parents’ get it right.
Indeed, over three-quarters (76%) of those in rented accommodation want more done to assist the Bank of Mum and Dad with specific online information and guidance.
Over a quarter (26%) of parents over 55 wanted to seek financial advice on how to make financial gifts and that 46% wanted to seek legal advice but were worried it will be expensive.