25th April 2013
Getting a loan from a high street bank may not be the walk in the park it once was but it seems the ‘bank of mum and dad’ is run off its feet with 40% of retirees
propping up their families financially writes Philip Scott.
A survey from life insurer Prudential has found two in five, or 40%, of those expecting to step away from work this year still provide financial support to dependants, with their average donation being £240 per month, and some 11% payout over twice that amount, providing financial cover for more than £500 a month, most of which typically goes on everyday living costs.
In contrast, only 30% of those retiring this year have families but currently do not provide them with any financial support, while the same amount do not have
The insurer’s Class of 2013 research tracks the financial plans and expectations of people entering retirement this year. The ‘Class of 2013’ report found that almost
one in seven retirees have children aged over 25 living with them and 37% believe their families still expect an inheritance.
Almost a sixth, at 16%, of 2013’s retirees have children under the age of 25 living at home, while 13% have children aged 25 and over still living with them. Around
4% actually share their homes with a child’s partner and even 3% count their grandchildren as housemates.
Those in London and Wales hoping to retire this year are the most likely to provide this support, with 52% and 49% respectively saying they support their families
Vince Smith Hughes, retirement expert at Prudential, said: “With nearly half of those expecting to retire this year still providing financial support to their families,
retirement income is increasingly becoming a family affair.
“Issues in the housing and jobs markets clearly make it financially difficult for adult children to leave home and most parents are happy to support them where possible.
If they can afford the support there is no issue, but with expected retirement incomes at a five year low, any additional outgoings could cause financial strain.”
Contributing to their families’ everyday living expenses was the most likely call on the finances of those expecting to retire this year. Around 11% of people retiring this year presently help out with family utility bills, 10% give money to support their grandchildren’s upkeep, 9% contribute towards other outgoings, including car insurance premiums or education costs, and 6% even help with mortgage or rent payments. But 15% say they provide money regularly to cover items such as food or travel, while 14% provide financial support to cover, non-essential – even luxury items such holidays, new TVs or even cars.
But despite these financial pressures the study concluded that almost half, at 49%, of those planning to retire this year still expect to be able to afford to leave an
inheritance to their families.
The study however found that 68% of those planning to retire this year will have no dependants living with them. Prudential’s research shows that those retiring in
2013 expect to receive average incomes of £15,300 a year, £3,400 less than in the group’s 2008 study, when retirees anticipated annual incomes were £18,700 on
“While supporting the family will always be a priority, it is important for people also to focus on their own comfort in retirement. Those who are planning to retire should consider consulting a financial adviser or retirement specialist, to assess the retirement income options that will best suit them and their family situation,” added Smith Hughes.