£26.7bn Payout From The Bank Of Mum And Dad In 2014
23rd December 2014
- Over £10bn (39%) goes towards younger family members' home buying costs.
- Over half of over-55s feel responsible for helping adult children financially.
- 27% would rather help now than leave an inheritance
Thursday 18 December 2014: Over-55s have contributed a staggering £26.7bn to support their children and grandchildren's life ambitions this year, according to new research by the Equity Release Council (The Council).
Paying off debt is the most common type of financial assistance given: one in five (20%) over-55s with younger families have been called on for this help in 2014.
Helping with a house purchase is the most expensive single item (averaging £14,064 among those who have given this support) ahead of contributing to wedding costs (£3,995) or helping to start a business (£3,271).
Across the UK, the value of this inter-family lending and gifting from over-55s in 2014 amounts to £26.7bn, with 39% of this amount - £10.4bn - going towards the costs involved in younger family members buying their own homes [see table 1].
Over-55s work longer and cut back on essentials to generate funds
Providing financial support to family members is among the most common uses of equity release, with 23% of customers drawing on their housing wealth for this purpose according to data from Key Retirement for Q3 2014.¹
Overall, The Council's research shows one in ten over-55s (10%) have used their housing wealth to support family members financially, either through equity release, remortgaging or downsizing their property.
Dipping into savings, inheritance or pension income is the most common way of generating funds for family giving, with almost half (48%) of over-55s having done so. However, 14% have delayed their retirement while 12% have taken on extra paid work.
More than one in six (17%) have significantly reduced their luxury spending to free up money for family members while 9% have significantly reduced their day-to-day essential spending on items such as food and heating. A worrying 5% have either taken out unsecured borrowing or signed up for medical trials to generate funds.
Over half feel responsible for helping adult children financially
More than one in three over-55s (38%) believe their family would struggle for money without the financial support they give them. Over half (52%) feel they still have a responsibility to offer financial help to their children even when they have grown up.
However, almost one in five (19%) cannot afford to offer their children or grandchildren any financial support without falling into difficulties themselves.
Nearly one in three (32%) have found their efforts to support family members are handicapped by a lack of available funds. This includes 12% who have not been able to cover the full amount needed; 11% who have been unable to offer help when they wanted to; and 8% who have had to decline a direct request for financial help.²
More than one in four (27%) over-55s would rather offer financial help to family members during their retirement than wait to leave behind an inheritance. Over half (53%) will be happy if they can leave behind any inheritance whatsoever and regard anything they can leave as a bonus.
Nigel Waterson, Chairman of the Equity Release Council, comments:"Economic pressures have caused a spike in demand for help from the Bank of Mum and Dad. Given a choice between leaving an inheritance or offering financial support at an earlier stage in life, it is clear that many over-55s would rather act now and take satisfaction from helping younger generations onto a more secure footing.
"It is no wonder that a climate of rising house prices and low wages leaves many of the older generation with a sense of responsibility for their family's financial fortunes, even after their children have reached adulthood. Many over-55s will go to considerable lengths to ease the pressure that younger relatives now face – even if their personal circumstances suffer as a result.
“The ability to draw on some of their accrued housing wealth to help out family members gives many older homeowners a compelling reason to consider equity release. Entering and moving up in the property market remains one of the hardest challenges that younger people face today. Equity release is a valuable option to give them a helping hand without having to downsize or put off your retirement to generate extra funds."
Source - www.equityreleasecouncil.com