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One in five over-55s financially insecure after helping loved ones onto property ladder – research

  • 28/08/2018
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One in five over-55s financially insecure after helping loved ones onto property ladder – research
Almost one in five parents and grandparents aged over 55 accept a lower standard of living to help family onto the housing ladder as more than 50,000 housing transactions are set to be supported by pension savings, data has shown.


Nearly 17% of older family members either would be, or already are, worse off as a result of providing financial assistance to loved ones, according to research conducted by Legal & General.

One in ten also said they felt less financially secure and 4% actually postponed retirement after supporting family or friends onto the housing ladder.

Based on the average contribution an over-55 household would be £18,000 worse off after providing financial support.


Using equity release to help

This year, the Bank of Mum and Dad is increasingly using equity release to help the homeownership ambitions of relatives.

L&G’s research found that nearly 44,000 housing transactions, roughly 14% of all those supported by family deposits, were partly or wholly supported by equity release, nearly double the number using annuities and over twice as many as those relying on taking out a loan. However, it remains a largely underutilised source of funding, with just 4% of over 55s saying they had used equity release.

Almost 20% of Bank of Mum and Dad transactions were partly or wholly supported by downsizing.

However the research found that people were unlikely to take advice about the impact their giving may have on their own financial future. Before gifting money to help family or friends onto the housing ladder, more than three-quarters did not speak to a professional adviser or even seek information online.

Women were also taking a bigger hit than men when supporting family members.

They were twice as likely as men to be concerned about their financial circumstances after gifting money, with 14% worried compared to 7% of men.

And more than a quarter of women accepted a lower standard of living after providing financial support, double the share of men at 13%.


Lower standard of living

Chris Knight, CEO of Legal & General Retail Retirement, said that the support many family members were providing was leaving them feeling the pinch as they approach retirement.

“This generation is helping family or friends onto the housing ladder, but they don’t necessarily have the wealth to do so without impacting their own retirement plans, and they should get advice to make sure this won’t leave them short of funds,” he said.

“After years of record lows, increases in the base interest rate also provide the added challenge of a rising cost of borrowing. Nearly a fifth of those aged 55 and over face a lower standard of living after helping loved ones onto the housing ladder, with one in ten also feeling less safe about their financial future at a critical stage in their lives.

“The good news is that more people are looking at the alternatives. Property wealth has the potential to be a transformative force for so many people in retirement and, as this research shows, more people are now using lifetime mortgages to provide a living inheritance that is, transforming the lives of their loved ones.”

He added: “Worryingly, in the majority of cases these individuals aren’t taking advice before they lend. Addressing the housing crisis by delivering more affordable homes is key, but we also need to address the shortfall in retirement planning too.”


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