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Generation Y

More than one in ten would use parents’ pension on mortgage deposit

More than one in ten (12%) 20-35-year-olds are prepared to ask their parents to access pension savings to help pay for a mortgage deposit, research from Old Mutual Wealth[1] shows. But only half as many over-55s are willing to use their pension to help children or grandchildren buy a home.

Helping children or grandchildren

Half as many over-55s are willing to use their pension to help children or grandchildren buy a home. Over-55s with private pension savings are now able to access their retirement funds with complete flexibility, following the introduction of new ‘Pension Freedoms’ on 6 April this year.

Asked if they would consider speaking to their parents about taking a lump sum from a pension in order to help with a house deposit, 12% of 20-35-year-olds said they would.

Getting a foot on the housing ladder

Although over one in ten among the Generation Y cohort (also known as ‘Millennials’, born between about 1980 and 2000) hope their parents’ pension will help them get a foot on the housing ladder, just 6% of those in the 55-70 age bracket say they would use some or all of their pension wealth to help children with a house deposit.

One of the big risks with these freedoms is that individuals see the opportunity to access a large capital sum and use it for something other than income in retirement. While every parent wants to help their children onto the housing ladder, they should think first about their own needs in retirement.

Financial support later in life

Equally, anyone tempted to pressure their parents into drawing a lump sum to help with a deposit should be very careful. If parents take too much from their pension and don’t have enough to retire on, they may rely on their children for financial support later in life.

Pension freedoms do however give people the option to deploy their pension pot as they wish. For some families, particularly those where the older generation have other assets with which to generate retirement income, the opportunity to help their children onto the housing ladder could be very appealing.

Solving money issues for future generations

Financial planning can help address all these issues and help solve money issues for future generations. To discuss your requirements, please contact The Clifton Business Consultancy on 0117 959 1022 or email cbc@cliftonbc.co.uk – we look forward to hearing from you.

Source data:

[1] All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 1,023 UK adults age 55-70 and 570 UK adults age 20-35. Fieldwork was undertaken between 11-17 March 2015. The survey was carried out online.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

A PENSION IS A LONG-TERM INVESTMENT. THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN. YOUR EVENTUAL INCOME MAY DEPEND UPON THE SIZE OF THE FUND AT RETIREMENT, FUTURE INTEREST RATES AND TAX LEGISLATION.

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