Pensions  

Retirees gift £15k on average to help grandchildren with living costs

Retirees gift £15k on average to help grandchildren with living costs

Some 35 per cent of retirees have given money to their family or friends in the past six months, according to LV’s most recent wealth and wellbeing monitor.

The quarterly survey of 4,000 UK adults undertaken by the pensions and retirement firm showed that of the 4mn retirees that gifted family and friends, the main reason was to help with day-to-day costs and bills.

On average, those helping their grandchildren gave £15,000 while the average amount given by all adults sat at £8,400. 

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The figures highlight that the rise in the cost of living is affecting millions of people, according to LV managing director of protection, saving and retirement, Clive Bolton. 

Bolton pointed out that a third of those aged 18-34 and families with young children are struggling financially, with many turning to family and friends to help with day-to-day expenses like bills, housing costs and childcare. 

“It’s understandable why grandparents want to help their family and pass wealth down through the generations,” Bolton said, adding there are a number of different options available when doing this, each with different advantages and disadvantages. 

Bolton explained: “Gifting money early can reduce inheritance tax liabilities and a grandparent can gift up to £3,000 a year without being added to the value of the estate. A couple could therefore gift £6,000 a year. If some or all of it was invested in a pension it would get tax relief.”

Getting on the property ladder

It was not just grandparents gifting family, as the research showed 39 per cent (over 20mn) UK adults have helped family or friends financially in the past six months. 

Of these, 11 per cent said it was to support a loved one buying a house.

However for grandparents, this figure was higher with 24 per cent gifting to their grandchildren to support them buying a home.

Bolton highlighted that another way grandparents could support their grandchildren was by setting up a Lifetime ISA for them. 

“Only the child or grandchild, as the account holder, can open and manage their Lisa but it’s possible to gift money to an account holder to pay into their Lisa,” Bolton explained.

LV pointed out that a Lisa can be a beneficial way to help younger family members save for a first home the government will add a 25 per cent bonus to deposits of up to £4,000 a year (ie, £20 for every £80 deposited). 

However, if withdrawals are made for any purpose other than purchasing a first home, a tax penalty of 25 per cent (ie, £25 on a withdrawal of £100) will apply unless the individual is terminally ill or aged 60 or above. 

Since the tax penalty is greater than the initial bonus, it is normally not the most tax-efficient investment if the penalty is likely to be incurred, warned LV. 

Mass Affluence

While the majority of gifting was done to support day-to-day costs and bills, 15 per cent of adults gifted more than £10,000 while 2 per cent of retirees gifted over £50,000.