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Bank of Mum and Dad gives boost as early inheritance takes off

28 April 2017

  • More than half of parents want to make financial gifts of an average £15,000 as early inheritance payouts
  • Two out of five (37%) would support tax breaks for living inheritances from savings or equity release
  • More than a fifth (22%) would use equity release to fund their gift

Parents want to give away an average of £15,000 as early inheritance gifts to help their children financially now rather than making them wait, new research1 from leading over 55s retirement specialist Key Retirement shows.
 
The research, which focusses on actual gifting behaviour and the intent to gift, gives a clear current and forward looking analysis of the Bank of Mum and Dad.
 
Its data shows that more than half (53%) of parents plan to make major financial gifts to their children with an average target of £15,000 per child, while more one in 10 (11%) expect to give more than £25,000 in gifts to each child.
 
Around 54% plan to fund the payouts through their savings but increasingly over-55s are looking to release cash from their home to help out family. Key’s study shows more than a fifth (22%) of those not wishing to, or able to use, savings would use equity release to fund their gifts.
 
The equity release market is seeing record growth as retired homeowners look towards alternative methods to fund gifts for loved ones. The latest figures from the Equity Release Council reveal for the first three months of 2017 a rise in plan sales of 61% over the same period of 2016 as over-55s cashed in an average of £6.9 million a day.
 
The research found strong support for tax breaks on living inheritance with 37% of parents and grandparents saying they would gift a living inheritance if the Government provided tax breaks. Key believes encouraging intergenerational gifting for major life purchases through tax breaks could play a major role in tackling intergenerational wealth issues.
 
Over a third (34%) of generous family members are helping their loved ones get a foot on the property ladder by using the money to help their children and/or grandchildren with a deposit for a new home, whilst a staggering 58% specifically want to help their children or grandchildren get on or move up the property ladder. Other support includes helping their family buy a car (17%) and paying for a wedding (13%).
 
Education is also a popular reason for parents to gift money to their family. One in 10 (10%) will gift money for higher education and/or training. The same amount (10%) plan to help pay off student debts.
 
Dean Mirfin, technical director at Key Retirement, said: “The financial squeeze on younger generations and the struggle they face in saving for homes and paying off student debt are major problems.
 
“It is clear parents and grandparents want to help and are already doing a lot to make gifts with more than half planning major handouts.
 
“The research shows high awareness of the use of equity release to fund gifts. More than two thirds were aware that they can release equity from their homes to help their loved ones.
 
“For those who maybe do not have the savings to make gifts, access to money which can be raised through equity release, is seen by many as the best early inheritance that people can give. It can have a dramatic effect on their families’ longer term financial wellbeing and the desire to gift remains relatively consistent across most of the UK.”
 
Table One: regional breakdown – gifting around the country
 
REGION PERCENTAGE WHO PLAN EARLY INHERITANCES
NORTH EAST 59%
EAST ANGLIA 57%
SOUTH EAST 56%
EAST MIDLANDS 55%
SCOTLAND 54%
LONDON 53%
SOUTH WEST 53%
YORKSHIRE & HUMBERSIDE 53%
WEST MIDLANDS 53%
NORTH WEST 51%
WALES 47%
NORTHERN IRELAND 31%
UK 53%
 
Source: Key Retirement, 2017