Digging ever deeper into retirement savings is leading some Bank of Mum and Dad lenders over 55 into a more uncertain retirement, Legal & General has found.
More than half (56%) of Bank of Mum and Dad (BoMaD) lenders who have or would consider helping family to purchase property said they are willing to because ‘it was a nice thing to do’. Almost another fifth (19%) said they feel it’s their personal responsibility to help out.
However, over a quarter (26%) of BoMaD lenders are not confident they have enough money to last retirement after helping their loved ones and 15% have had to accept a lower standard of living. A small number (6%) are even choosing to postpone their retirement.
Chris Knight, chief executive, Legal & General Retail Retirement, said: ““There are a vast range of considerations today’s retirees face when it comes to planning their finances, from whether they can afford to help their children buy a home, to setting aside funds for any future care needs they may have.
“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 Bank of Mum and Dad.
“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.
“Thousands are still dependant on the Bank of Mum and Dad to take their first or next step on Britain’s housing ladder. The generosity of parents and grandparents is inspiring, but many are making big financial decisions without adequate planning or professional advice.
“As an industry, it is crucial that we provide the products and solutions people need in later life, as well as encourage them to seek the support of advisers who can help them navigate this increasingly complex landscape.”
Although more than half are using cash (53%), 9% are cashing in lump sums from their pension savings, 7% are using their pension drawdown and 6% are drawing on their annuity income to help support their loved ones’ homeownership ambitions.
Unlocking housing wealth with equity release is becoming more popular with the over-55s and many are now using the money to help with a deposit.
Some 16% of BoMaD lenders have or would release equity and use that money to financially support their children or grandchildren.
This makes it the third most popular source of funds for the Bank of Mum and Dad. But BoMaD lenders are using these funds to help with their own retirement ambitions too.
More than a quarter (26%) would or have used their housing wealth to fund home renovations and nearly three in every five (58%) parents and grandparents are using it to free up cash to stay in their own home.
Across the over-55s surveyed who haven’t released property equity already, well over a quarter (29%) said they would consider drawing equity from their home with a lifetime mortgage.