The Bank of Mum and Dad (BoMaD) contributed £6.3bn in 2019 to help their children get on the housing ladder, the equivalent of a top 10 UK mortgage lender, latest L&G research has revealed.
The findings follow earlier research from L&G which showed that this year the average BoMaD contribution has risen by more than £6,000 to £24,100.
When it comes to gifting money, the BoMaD is drawing on a wide range of sources to financially support other family members with a deposit. Although more than half are using cash (53%), 9% are cashing in lump sums from their pension savings, 7% are using their pension drawdown and 6% are drawing on their annuity income to help support their loved ones’ homeownership ambitions.
Digging deeper into retirement savings is leading some over-55s into a more uncertain retirement however, the firm said.
Over a quarter (26%) of BoMaD lenders are not confident they have enough money to last retirement after helping their loved ones and 15% have had to accept a lower standard of living. Six per cent are choosing to postpose their retirement.
The research also said that consumers are increasingly considering other solutions that can help them to support family members but also pay for the retirement they want to lead. Unlocking housing wealth with equity release is becoming more popular with the over-55s and many are now using the money to help with a deposit. Sixteen per cent of BoMaD lenders have or would release equity and use that money to financially support their children or grandchildren.
“Thousands are still dependant on the Bank of Mum and Dad to take their first or next step on Britain’s housing ladder. The generosity of parents and grandparents is inspiring, but many are making big financial decisions without adequate planning or professional advice,” L&G Retail Retirement CEO Chris Knight said.
“Retirement is much longer, and much more varied, than it used to be. Gone are the days of ‘once and done’ retirement decisions. Informed choices in the run-up to, and at the start of, the retirement journey can make a huge difference when it comes to being able to fund the retirement people really want. As an industry, it is crucial that we provide the products and solutions people need in later life, as well as encourage them to seek the support of advisers who can help them navigate this increasingly complex landscape.”
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