According to recent research, 40% of people who are retiring in 2013 are financially supporting their children by an average of £240 each month.
The study published by the insurance company, Prudential, has found that approximately 11% of this group were giving their kids over £500 every month and potentially putting their own income in risk when they retire.
Head of Business Development for Retirement Income for the Prudential, Vince Smith Hughes, said: ‘If they can afford the support there’s no issue, but with expected retirement incomes at a five-year low, any additional outgoings could cause financial strain.’
In the Prudential survey, one in seven still had children living under their roof who were older than 25. In addition, nearly a third of people surveyed will retire with one or more dependant staying with them, some of whom will be grandchildren.
This increasing use of the bank of ‘gran and granddad’ is happening at a bad time for pensioners as they are hit by lower annuity rates along with changes to their tax-free allowance and low interest rates on savings.
The Prudential report says that a person retiring in 2013 will have a retirement income of an average of £15,300 a year— they would have got around £3,400 more if they had retired in five years ago.
Most would-be retirees are helping out their family’s finances by paying for everyday costs such as travel expenses, utility bills and food. However, many are also paying for luxury items, with holidays, electrical appliances and cars being purchased for their children.
The survey found that pending pensioners are more likely to be helping out their children financially in London, although there are high numbers in the West Midlands and Wales also.
Surprisingly, almost half of the people questioned who were supporting their children financially, said that they would still be leaving them a sizeable inheritance. Which is good news for their families, as 37% also said that they thought their children were expecting to receive an inheritance on their death.
For those questioned who were no longer having to financially support their families, 30% didn’t have any dependants and a further 30% were not giving any money to their children.