Bank of Mum and Dad (BoMaD) now a top mortgage lender, making retirement less certain
Research from Legal & General and Cebr has revealed that the Bank of Mum and Dad (BoMaD) is now the equivalent of a top 10 UK mortgage lender, gifting a total of £6.3bn in 2019.
This year, the average BoMaD contribution has risen by more than £6,000, to £24,100.
Nearly a fifth of over-55s (19 per cent) are gifting money because they feel they have a responsibility to help. However, 26 per cent of BoMaD lenders are not confident they have enough money to last their retirement after providing support. Parents are increasingly using equity release to help family with deposits and fund retirement.
The new research shows that the Bank of Mum and Dad is drawing on a wide range of sources to financially support other family members with a deposit. More than half are using cash (53 per cent), 9 percent are cashing in lump sums from their pension savings, 7 per cent are using their pension drawdown and 6 per cent are drawing on their annuity income to help family members buy a home.
Digging into retirement savings is leading some over-55s into a more uncertain retirement. Over a quarter of BoMaD lenders are not confident they have enough money to last their retirement after helping their family, and 15 percent have had to accept a lower standard of living. A small number (6 percent) are even choosing to postpone their retirement.
Chris Knight, Chief Executive, Legal & General Retail Retirement said:
“There are a vast range of considerations today’s retirees face when it comes to planning their finances, from whether they can afford to help their children buy a home, to setting aside funds for any future care needs they may have. 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.”
Kindly shared by NAEA Propertymark