26th March 2015
More than a third, at 36%, of people planning to retire this year are still providing financial support to family members, increasing the pressure on already stretched future retirement income claims new research from Prudential.
The figures come from the insurer’s latest ‘Class of’ research, now in its eighth year, into the future plans, finances and aspirations of those planning to retire in the year ahead.
It concluded that people in the ‘Class of 2015’ who support their family financially, pay out nearly £250 a month or almost £3,000 over the course of a year on average. Nearly one in eight, or 12% are paying more than £500 a month to support family members.
The dependants of the ‘Class of 2015’ retirees are made up of their children and their partners, at 56%, their grandchildren and their partners, with 27%, their parents at 7% and other family members at 10%.
Despite the squeeze placed on retirement incomes by the support given to dependants, the analysis shows that 29% of the ‘Class of 2015’ still plan to leave an inheritance, averaging £190,600. However the proportion expecting to leave an inheritance has fallen sharply in recent years. In fact when Prudential first asked retirees about their intentions in 2011, more than half, at 52% expected to leave an inheritance.
Stan Russell, retirement income expert at Prudential, said: “The financial pressures faced by all age groups, ranging from the cost of buying a home to the cost of funding education, mean that financial commitments to family members are now not ending when retirement starts. A large proportion of this year’s retirees will be providing support to their families through one form or another and as a result they will see their retirement incomes squeezed.
“Even if the financial support they offer is minimal, many new pensioners will continue to play an important role in providing a home for other family members. This may of course have an impact on any future plans to downsize and will obviously need to be factored into a retiree’s budgeting plans for their post-work years.”
While the new pension freedoms will mean greater flexibility for people looking to take a retirement income from their savings, Russell asserted that the rules do not change the fundamental priorities of providing for loved ones in retirement.
The research results also show that the money being provided by retirees to their dependants is most likely to be used for everyday living costs – 11% give money on a regular basis to cover everyday living costs, for example food or travel. A generous few – 8% however will make a one-off contribution to the cost of a luxury purchase like a new car, a holiday or a new television.
In addition, 8% contribute financially to their grandchildren’s upbringing and 6% are helping to cover the cost of at least one family member’s university education.