Passing on wealth to children could impact retirement |
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Derin Clark

Derin Clark

Online Reporter
Published: 29/08/2019

Over half (53.9%) of baby boomers said that passing on their wealth to their children is important to them while one in five (19.1%) would choose to spend any extra money on a financial gift to their children, research from Aegon found.

According to the research, a desire to pass on wealth to their children may impact their ability to enjoy retirement, with a fifth of baby boomers (those born between 1946 and 1964) saying it might hold them back from spending more during their retirement.

Steven Cameron, pensions director at Aegon, said: “As the youngest of the baby boomers reach the age they can access their pension, many will begin to think about inheritance planning and the desire to pass on wealth to loved ones. Transferring wealth is an ambition for many individuals and the introduction of the pension freedoms in 2015 has increased the options for doing so with over-55s now being able to access their defined contribution pension pot flexibly, taking out as much or as little as they like.

“For some retirees looking to pass on wealth, however, the desire to help family members may come at a cost if it means they hold back from spending in order to fulfil this expectation.

“It’s good that there are now more options for transferring wealth to the next generations. But whether it’s passing on remaining defined contribution pension funds on death or granting financial gifts earlier to help children on to the housing ladder, there are complex considerations including around tax.

“The options available and the tax implications will depend on your personal and financial circumstances, so it is best to seek financial advice to make sure you are taking the best course of action for you and your loved ones. While for some the advice will show a degree of caution is needed to ensure savings do not run out in retirement, for others it could highlight a level of underspending and encourage a less frugal approach.”

Retirement risk

When workers start preparing for retirement, ensuring that they enough money in their pension pot to comfortably cover their finances throughout their lifetime is vital. In June this year, a report by the World Economic Forum warned that retirement saving will not be able to cover a retiree’s lifespan and that women should prepare to bear the brunt of the shortfall, going without retirement savings for two years longer than their male counterpart. For more information about the risks when planning for retirement, read our guide on retirement planning risks.


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