The Bank of Mum and Dad is a well-known resource for children that find themselves in financial difficulty, but what about the Bank of Gran and Grandad? This little-known financial reserve for older children and grandchildren is becoming increasingly called upon, with research from MetLife revealing that more than one in three over-65s have paid off debts for adult children or teenage grandchildren.
Some 35% have paid debts worth over £2,000, more than double the figure of over-45s with just 17% having helped out their teenage children. In the 55-64 age group, meanwhile, 26% bailed out children or grandchildren to the same sum, showing it's the older generation that will often be turned to more – or perhaps have more capacity to help.
This highlights the continuing and growing pressure that pensioners have on their retirement income, as needing to pay off debts for children or grandchildren can put a huge amount of pressure on their often static incomes. Even if they've got savings to fall back on, losing over £2,000 could put a significant strain on finances, and that's why having flexible retirement solutions in order to be properly prepared is so important.
Dominic Grinstead, managing director at MetLife, commented: "Helping out family is clearly important to many parents and grandparents and it appears that the requests for help don't necessarily stop when you are retired.
"The worry is that grandparents are having to make sacrifices to help out and risking their own financial security to enable children and grandchildren to clear debts. Retirement income solutions need to be flexible enough to enable savers to cope with emergencies or financial shocks because it is guaranteed there will be surprises once you retire."
Having a secure income to fall back on is crucial, and that's why a lot of pensioners will still prefer the security of an annuity – despite recent Budget changes meaning there's a lot more flexibility when it comes to spending your pension pot. An annuity provides a guaranteed income for your whole retirement, and that's something that can't always be said with other investment vehicles.
However, for those emergencies or when you need to help children or grandchildren, you'll want to have some form of savings in place. Utilising the tax-free benefits of an ISA should always be the first port of call – ideally you'll have a decent ISA pot built up which could offer impressive returns with the right account – while savings accounts that can supplement your income by paying interest monthly could well be beneficial too.
As retirements are getting longer and pensioners are realising their financial commitments don't end when their children leave home, it's more important than ever to be prepared. There could still be considerable financial demands to contend with, so check out our annuity service to see if it could provide the retirement income you need then compare the best ISAs and monthly interest savings accounts to help boost your income even more.
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