Parents who lend money to their children are at risk of compromising their own financial position, according to a survey by Investec Wealth & Investment.
Of the 1,000 adults surveyed, a third of those aged over 55 either plan or give money to their children at an average of £5,026 a year. 18% of those respondents will utilise the pension freedoms to make these gifts by withdrawing cash from their savings.
The survey also found that 18% think they currently give away too much money, with 11% admitting to cutting back on their capital to finance their loved ones.
The biggest cutbacks made include:
- 50% made cutbacks on travel
- 42% made cutbacks on eating out
- 39% made cutbacks on home improvements and refurbishment
- 21% compromised on hobbies
- 11% reduced costs on food shopping
- 3% delayed retirement plans to finance their children.
Chris Aitken, head of financial planning at Investec Wealth & Investment, said:
“Generosity has its limits and we would strongly advise people to stick to what they can afford without it affecting their own quality of life. This means planning to have enough capital to enjoy a long and active retirement, not forgetting that they may also need to factor in the cost of long term care.
“It is a concern that recent pension freedoms could result in some grandparents gifting too much of their retirement pot without considering their potential longevity. Anyone considering using their pension pot in this way should seek financial advice first.”