Parents and grandparents providing £18,000 on average to help family members buy a home

Parents and grandparents across the UK are dipping into their pension pots or housing wealth to help family members buy a home, according to research by Legal & General and the Centre for Economics and Business Research (CEBR).

In fact, almost one in five (17%) parents and grandparents over the age of 55 are accepting a lower standard of living to help their loved ones onto the housing ladder. One in ten (10%) said they felt less financially secure and 4% actually postponed retirement after providing financial assistance to loved ones.

The “Bank of Mum and Dad” is set to be the equivalent of a £5.7bn mortgage lender this year, responsible for more than one in four UK housing transactions in 2018. On average, parents are providing £18,000 in financial support to younger family members.

Over 50,000 house purchases this year will be partly or wholly funded by people cashing in their pension pots to provide a lump sum for a deposit, with another 23,000 supported by individuals using their annuity income.

Yet in most cases these individuals aren’t taking 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 (77%) did not speak to a professional adviser or even seek information online, the research showed.

Chris Knight, chief executive of Legal & General Retail Retirement, said: “The Bank of Mum and Dad continues to play a major role in the housing market, but the support many people provide is 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.”

The good news is that more people are starting to look at the alternatives, Knight added.

“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.”