Generous grandparents putting their own finances at risk by giving away too much cash

5th October 2015


Generous parents and grandparents who gift money to their grown-up children and grandchildren admit that they are putting their own standard of living at risk as a result finds new research.

The study by Investec Wealth & Investment found that almost a third, at 32%, of parents and grandparents aged over 55 are currently or are planning to gift money to their children and grandchildren at an average of £5,026 a year. Of these, 18% plan to take advantage of the new pension freedoms by gifting money from their newly cashed-in pension pots.

On a regional basis, grandparents and parents in London and the South East are on average the most generous while those in Wales gift the lowest amount.

However, nearly one-in-five, at 18%, think they are giving away too much and 11% admit to having had to cut back on their lifestyle in order to afford their generosity.

Cutbacks made by overgenerous parents and grandparents include travel, meals out, home improvement plans, clothes, hobbies and even food shopping.  Notably 3% of respondents have had to delay retirement to help finance the younger generation.

Chris Aitken, head of financial planning at Investec Wealth & Investment said: “It’s understandable that many grandparents want to give their grown-up children and grandchildren a helping hand financially, particularly with big ticket items such as house deposits and education fees.  But generosity has its limits and we would strongly advise people to stick to what they can afford without if 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.”

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