2020 has been a year like no other. Many people across the UK have seen their finances become adversely affected as a result of the global pandemic. In fact, retirees have gifted £500 million to help their younger relatives get through the crisis.
A recent survey by equity specialists Key looked at the numbers to see exactly how many people who are looking to retire in 2020 will continue to support family members financially. Over 1,000 newly-retired people responded to survey questions about their financial security and retirement planning. It revealed that over one third (34%) are setting aside over £3,700 a year – or £311 per month – for their loved ones.
Why fund family members?
So, where is this money destined for? One of the main reasons for sending funding to loved ones, based on Key’s research, is to allow them to live rent-free, with around 29% contributing to this for their family members. Property is something of a theme here, with 18% of retirees in 2020 using their money towards a deposit on a house or apartment, setting their children, grandchildren, or other family members up on the property ladder.
As well as ensuring they could afford to have somewhere to live, the cost of living is also a major reason for so much money being handed over. Almost a quarter (24%) of retirees said they are providing cash for everyday living expenses, and 20% are covering the household bills.
The risk of overspending
But can retirees afford to give up so much of their own money in their later years? There are steps to take to plan for the future, but the pandemic is set to reduce their current averageannual income of under £21,000 a year. So, by giving one-fifth of this to help family with their finances, they are significantly reducing their own financial stability.
“Whilst many older people enjoy treating their loved ones – even if it is just paying for a nice meal – a third of those who intend to retire in 2020 are doing more than this, regularly topping up their wider family’s finances,” said Will Hale, CEO at Key.
“The current economic situation is likely to place even more pressure on people’s finances but with the pandemic impacting pension savings, this could see some retirees having to tighten their belts and could impact their ability to continue to support younger generations.”
For the newly retired, finding the balance between looking after themselves and caring for their family can be tricky. It’s worth looking into ways of gaining additional funds to remove the need to having to make a difficult choice later down the line.
For instance, if they have other assets, such as property, could it be time to put it on the market? Or are there opportunities to take some tax-free cash out on their existing home? Equity release can free up money if the property is worth over £70,000, so over-55s could tap into extra funds.
If you’re considering retiring, take the time to weigh up your finances. Now, more than ever, financial security is set to be impacted by the pandemic, so take the steps now before you finish work.
