A Royal London survey of more than 200 advisers has revealed that clients are bailing out their adult children due to the cost-of-living crisis.
While more than half (53%) of advisers report that clients are adjusting their finances due to cost-of-living increases, a quarter (25%) said one of the main requests from clients is them looking to access funds to support their adult children with the rising cost of living.
Some 55% also reported that clients are tapping into their pension savings to boost their disposable income, with around a third (36%) increasing the amount of drawdown cash taken.
Another 33% said clients were taking an additional lump sum for themselves – but 18% of advisers said clients are taking a lump sum specifically to help their children.
Risking their retirement
Clare Moffat, pensions expert at Royal London, said: “The cost-of-living crisis means that many grown-up children are relying on a financial leg up from their parents to cope with rising costs.
“While it’s tempting to use retirement cash to help family, it should come with a note of caution. There’s a real danger that it will compromise parents’ long-term retirement security and impact their overall retirement − ultimately spending more now will mean spending less later.
“For today’s young adults, long-term financial planning looks very different from the journey their parents took. Reaching key financial milestones, like buying a house, involves a much longer wait than previous generations experienced.
“While it’s natural for parents to help, the right balance needs to be struck. Dipping into your pension pot and withdrawing funds early can have a dramatic impact on your overall retirement. It can also make it harder to build a pension pot back up in future.”
