The coronavirus (COVID-19) pandemic has led to more people supporting
younger family members financially. New research shows that 5.5 million older
family members expect to provide additional financial support to younger
members as a direct result of the pandemic.
Of these, 15% estimate they will provide an additional sum
of £353 in financial aid. The most common reasons given for the payments were
to help cover household bills, rent payments, allowing them to move back to the
family home or paying off debts. This equates to £1.9 billion being given to
younger family members needing financial support.
This COVID-19 specific support comes in addition to regular
ongoing financial support provided by older family members. Over a third (39%)
of young adults, around 3.3 million people, receive regular financial support
from their older family members and depend on it to cover their monthly outgoings.
Older family members provide on average £113 a month,
collectively giving £372 million to loved ones each month in the form of
regular gifts. While the majority (31%) say they use monthly gifts to save for
‘big ticket’ items like a housing deposit, over a quarter use it to pay for
everyday essentials (29%) and a similar number to pay their bills (27%).
Despite the significant sums handed out, 80% of older family
members who gift money feel it is only natural to provide support to their younger
relatives and are more than happy to do so. Of the 50% of adults who have
received financial aid from a family member, many have sought further support
during this year.
16% have utilised the government furlough scheme, 15% moved
back to their family home to live rent free and 13% have taken out a one-off loan.
The trend of younger family members moving back home is becoming more common, with
the most recent data from the Office for National Statistics (ONS) showing that
over the last two decades, there has been a 46% increase in the number of young
people aged 20-34 living with their parents, up to 3.5 million from 2.4m.
While the majority (62%) of those who give away money do so
knowing they can afford to maintain their current lifestyle, the research
suggests that selfless relatives are occasionally making changes to their own
finances to meet the expense. Over a third (38%) of those who gift money to
family members have made sacrifices in order to do so. While many (31%)
reported cutting back on some day-to-day spending in order to gift money, a
fifth (21%) admitted they struggled to pay some bills having helped out a loved
Most parents and grandparents will gladly help out when they
can, but people are often making personal compromises to provide this support. Giving
money to a family member has the potential to be a special experience, but the
key is not to lose sight of your longer-term plan.
There is a risk that people could be underestimating what
they need to fund a comfortable retirement, and therefore it’s important to
gift sensibly. Utilising property wealth, by either downsizing or using equity release,
can often be helpful here as it allows the opportunity to give a living
inheritance without touching your income.
These decisions aren’t easy, and the tax rules mean gifting
money can be complicated. When gifting, HM Revenue & Customs stipulates you
must be able to maintain your current standard of living from your remaining
income to take advantage of tax exemptions and there are tax implications for
anything gifted over the £3,000 annual allowance.
“Bank of mum and dad” open for financial support
Younger generations, who stand to be impacted most by the
crisis, may need to call on you – the ‘Bank of Mum and Dad’ – for financial
support. If this is the case you need to evaluate how any cash calls could
impact your own retirement plans. To discuss any concerns that you may have,
please contact us.
 Opinium Research ran a series of online interviews among
a nationally representative panel of 4,001 UK adults between the 25 September
and 3 October 2020