Financial pressure mounts on London ‘Banks of Mum and Dad’ with many delaying retirement and using pension pots to help children

London ‘Banks of Mum and Dad’ are under huge amounts of pressure to bail out dependent children by dipping into their pension pots, according to a British investment company.

Parents of under-18s are planning to delay their retirement, compromise their lifestyle and use pension savings to give their children and grandchildren a helping hand, according to a YouGov survey on behalf of Brewin Dolphin.

Of those asked 34% of London parents believe that in their lifetime they will have to contribute between £25,000 and £100,000 per child in order to cover home deposits, university fees and other living expenses.

“The Bank of Mum and Dad is facing its own financial crisis across the country,” warned Nick Fitzgerald, Head of Financial Planning at Brewin Dolphin.

“Our planners are finding increasing numbers of anxious clients facing demands from their children who cannot get on the property ladder or need financial help with other areas of their lives.

“The pressure is such that we’re also seeing the emergence of second generation funding from the ‘Bank of Grandma & Granddad’.”

The pressure on families is far higher than it was a few years ago, with 40% of parents of today’s under-18s believing they will have to compromise their lifestyles because of the demands on their children, compared with just 26% of parents with children who have already reached adulthood.

“While many parents are willing to give, it is important that this is not done at the expense of their own retirement planning, particularly given the current uncertainty around annuities and income generation”, Fitzgerald added.

“People in their 30s and 40s now will generally not enjoy the pension pots their parents did, and this survey shows a worrying trend towards parents needing to choose between helping their children and sacrificing their retirement savings.

“It is important to take proper advice and consider the future before signing cheques to your kids, however well intentioned.”

Picture courtesy of Images of Money, with thanks

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