A fifth of those born in the UK between 1946 and 1964 said that they would be held back from spending in retirement if they pass on wealth to their children, research by Aegon has found.
Over half (53.9%) of the 650 people surveyed said that transferring wealth to the next generation is important to them, even though it could significantly impact their retirement pot.
Additionally, 27.3% admitted that spending on family is a significant outflow at the moment, and 19.1% said they would gift any extra money they have to their children.
“While it is natural that parents want to help their children get on the housing ladder it must not be at the expense of their own financial security in retirement,” said Helen Morrissey, pension specialist at Royal London.
“Financial circumstances can change quickly, and parents must take advice before lending money to their offspring on whether they can genuinely afford to manage without this money over the long term.”
Help at what cost?
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.
“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.”
