Andrew Megson, managing director of retirement for pension provider Partnership, said in the past year grandparents in the UK, whose mortgages are paid off and who retired on good pensions, are increasingly having to help their children and grandchildren whose financial prospects are far less rosy.
The increased levels of financial support include paying school fees and helping them onto the housing ladder, and this trend is likely to continue.
He said: “It is interesting to note just how much financial support this [older] generation provides. With the rising cost of living and an increasing number of households finding that their budgets are stretched, we anticipate that intergenerational giving will grow in the future.”
It is no surprise that the younger generations are cash-strapped: those aged 60 and over generally benefited from good defined benefit pensions, had no mortgages at the time of retirement and were able to build up good savings pots.
Meanwhile, the “squeezed” middle-age generation are struggling to fund their own pensions, pay for their children’s education and meet their daily costs in an environment where inflation is now at 2 per cent, 1 per cent wage growth and bank base rates are 0.5 per cent.
Robin Baker, planner for Shepton Mallet-based Eden School Fees Planning, said: “There is a problem in waiting for the younger generation. Baby boomers had it good in general and we have found that grandparents are being called on more, as parents’ incomes are stretched thin due to huge mortgage payments and provision, in addition to ever-increasing lifestyle expectations.”
He added: “The first advice I give to any parent is to start planning school expenses as soon as possible. The earlier the better as it can really make a difference to the overall cost. This advice works in a broader context as well, whether for retirement planning or house purchase. The old adage has never been more true: failing to plan is planning to fail.
“One way or another the wealth of the baby boomers will be passed to the younger generation but this does not negate the need for a plan. My advice to the baby boomer juniors is: make the most of your parents’ wealth, don’t rely upon it heavily and get your own financial plan.”
There are an estimated 14.4m grandparents in England, Wales and Scotland.
These gave £2.83bn directly to their grandchildren in the past year.