Saving for retirement used to mean putting money aside to fund a financially comfortable old age, but no more.
Today’s over 55s are increasingly spending their savings on others – with children relying on the bank of mum and dad heading the list of demands for hand-outs.
And at the same time, poverty among Britain’s elderly is on the rise, says research from financial firm Legal & General.
More than half of over 55s (56%) dip into their savings to help children buy a home because they ‘feel it’s a nice thing to do’, says the data.
Dipping into savings
Another one in five feel obliged as parents to help their children out financially whenever called on for cash.
But although the lion’s share of the hand-outs come from cash savings, one in five over 55s are taking the cash from pensions either as lump sums, regular drawdowns or annuity incomes.
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 and unfortunately this could be leaving some facing a poorer retirement, especially if they don’t get the right advice.
Equity release – taking cash locked in the value of a home – is also becoming more popular as a source of funds to help children buy a property of their own with 16% resorting to this method.
“Housing wealth has the potential to play a hugely transformative role for both Britain’s retirees and the next generation of homeowners. There is around £1 trillion of property equity owned by the over-55s. Not only could this wealth be transferred across the generations to provide a ‘living inheritance’ for children, but it could also give many retirees the financial freedom they need to enjoy the colourful retirement they really want,” said Knight.