Bank of Mum and Dad risking retirement income as average loan hits £24k

Its research found that the average contribution from the Bank of Mum and Dad has risen by more than £6,000 to £24,100.

The Bank of Mum and Dad is now the equivalent of a top 10 UK mortgage lender, gifting a total of £6.3bn so far in 2019, and 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.

Nearly a fifth of over-55s (19%) are gifting money because they feel they have a responsibility to help, but 26% of BoMaD lenders are not confident they have enough money to last their retirement after providing support.

15% have had to accept a lower standard of living and 6% are even choosing to postpone their retirement.

However, the Bank of Mum and Dad research has also revealed 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. 16% of BoMaD lenders have or would release equity and use that money to financially support their children or grandchildren. This makes it the third most popular source of funds for the Bank of Mum and Dad.

Last year, just 12% of BoMaD lenders said they had sought professional advice from a mortgage broker, while nearly a third (31%) this year had or would seek advice. However, nearly half of all BoMaD lenders (44%) still hadn’t taken (or would not take) any advice at all before gifting money.

Chris Knight, chief executive of Legal & General Retail Retirement, said: “Parents and grandparents across the UK want to see their loved ones settled in homes of their own and are giving generously as part of the Bank of Mum and Dad. Many are using their pensions and savings to help out and unfortunately this could be leaving some facing a poorer retirement, especially if they don’t get the right advice.

"The generosity of parents and grandparents is inspiring, but many are making big financial decisions without adequate planning or professional advice.

"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.”