The Bank of Mum and Dad is open for business in many families, but it seems that the Bank of Gran and Granddad is just as busy – and unfortunately, many grandparents could be sacrificing their own financial security in the process.
Research from LV= has revealed that a quarter (25%) of grandparents who have given money to their grandchildren took the funds from their pension, and a further 16% plan to do the same when they reach retirement age. Many are giving substantial amounts, too, whether from their pensions, savings or wages, with the average grandparent having already gifted £1,633, while a particularly generous 6% have given gifts of more than £10,000.
This generosity shows no sign of waning, either, as 56% of those surveyed plan to give away even more money in the future, to an average tune of £2,938. As for why they're helping the grandkids? Well, 21% said that they raid the pension savings to help their grandchildren get onto the property ladder, while university fees (20%) and cars (17%) also featured high on the list of expenses. A similar number wanted to help with everyday outgoings, too, such as bills (21%) and hobbies (19%).
This suggests that many grandparents are taking full advantage of the pension freedoms and are using their ability to access funds for the benefit of other members of the family, and often view the financial gifts as a "living inheritance", with 37% wanting to see their grandchildren enjoy the money they receive.
However, while this level of generosity between the generations is admirable, it's important that grandparents don't get too carried away. Many want to be able to help out their grandchildren financially but they need to make sure that they've got enough left in the kitty to cover their own expenses in later life, which makes careful management vital.
John Perks, managing director of Retirement Solutions at LV=, agrees: "It's heart-warming to see grandparents so willing to help out their grandchildren both day-to-day and with large ticket purchases. But with one in five using their pension to help out, it's important these kind individuals plan for their retirement and have enough money left for themselves, as even smaller outgoings like bills can become harder to meet later in life, as well as the flexibility to access it."
That's why it's so important to have a proper financial plan in place when you're approaching retirement, as your pension may need to provide an income for several decades. Of course, we're not suggesting that you stop being generous, but we are suggesting that you stay sensible, and ideally seek suitable guidance and advice – Pension Wise could be a great place to start – to make sure your money works as hard as possible, for you as well as your grandchildren.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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