Families lean on pensioners for handouts

Queen Elizabeth IIAnwar Hussein/Anwar Hussein/EMPICS Entertainment

The myth of poverty-stricken pensioners relying on their families for support is a fallacy. A new report has revealed that far from being a burden, one in three pensioners are actually providing hand outs for their families - up from one in four last year.

So where is the money coming from, and should we be worried?
The research, by Key Retirement Solutions, found that the number helping their families out had risen dramatically. Dean Mirfin, Group Director, said "Retired homeowners are putting families first as the recession continues to squeeze finances across generations."

"Helping out family is a powerful motivation for elderly homeowners and it is striking that they feel financially secure enough to help families before themselves and are under less financial pressure from their own debt."

Where is it coming from

The cash in question is coming from equity release - as retirees plunder the value of their properties though schemes that enable them to continue living there.

It's one reason why the market for these schemes continues to mushroom. It was up another 15% in the last year to £446 million. That's a huge sum of cash released from the homes of the UK's pensioners.

As well as helping their families, home and garden improvements remained the most popular use of equity release cash - for 58% of customers. Meanwhile 30% paid for holidays, 16% used money to pay regular bills and 18% used it to clear outstanding mortgages.

Should we worry?

On the plus side, this is a logical development in a society where income is under pressure among all age groups, and yet millions of people are sitting on huge property assets. The releasing of that equity has made a huge difference to the quality of life for thousands of people.

It is also a relief to see that the number of people using equity release to clear their debts fell over the past year from 31% to 25% - so they are not being forced into action by a crisis.

The risk, however, is when it is being done without consideration for the long-term consequences. While there are plenty of people for whom this is the right approach, there are those who may be eroding more of the value of their property than they realise.

By using the equity in this way there are concerns that there will be nothing left if they are required to pay for long term care later. There may also be families where secrets are rife, and where those relying on an inheritance are left with a horrible surprise.

But what do you think? Is this a sensible way to use the value in your property? Let us know in the comments.

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