Passing on Wealth
Research carried out by Aegon confirmed that 54% of those aged between 55 and 73 believe passing on wealth to children is important, although they are concerned it could have a negative effect on their retirement provisions, with a fifth of those surveyed stating it might hold them back from spending more in retirement.
For many, spending on family is already high, over a quarter of those surveyed said this is already a significant cost. With property prices being at a premium it is difficult for the younger generation to get on the property ladder and naturally we wish to assist our children with this. The ‘bank of mum and dad’ has recently been reported as being within the top ten mortgage lenders, having contributed £6.3 Billion to help their children get on the housing ladder, so often retirees are not only having to meet their own needs but also that of their children.
Of course, it is natural to want to help your children financially, although this should not be at the cost of your own financial security in retirement. Financial circumstances can change and parents should seek advice before lending money to their children.
With the pension reforms, accessing benefits flexibly has been one method that retirees are using to assist their children, although careful consideration should be given to ensure you have sufficient assets remaining for your own needs, especially if long term care could be an issue in the future. This method could also give rise to a tax liability depending on the amount withdrawn. Of course, we are all living longer, which means our pension funds will also need to last longer, so your own needs should be a priority.
Although many prefer to gift capital sums to their children, this is not always possible and regular amounts could instead be saved in a suitable plan such as a Lifetime ISA.
If you are considering whether to make gifts to your children and wish to consider the best way to do this and the impact on your own finances, please contact the office and speak to one of our highly qualified Advisers who will be happy to assist you.