Retirees 'under pressure' to lend to family

Press Association
Retiree with money troubles
Retiree with money troubles

Nearly one in three older people expects to come under pressure from their own family members to dip into their retirement pot after new pension freedoms come into force this spring, a think-tank has found.

Some 30% of people aged 55 and over predict that their relatives will try to make them feel obliged to lend them money after the reforms come into place from April which give people more freedom and choice over what they do with their retirement cash, research by the Centre for the Modern Family found.
Across the survey, which included people of all ages, more than one in four (27%) of people envisage coming under pressure at some point to provide family members with loans from their retirement savings, rising to 29% of people with grown-up children who have not yet flown the nest and are still living at home.

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The Centre for the Modern Family was set up by Scottish Widows in 2011 to shed more light on the challenges facing families. More than 2,000 people were interviewed for its new report, titled The New Landscape of Later-Life Planning.

More flexibility

From April, instead of being herded towards buying a guaranteed retirement income called an annuity with their defined contribution (DC) pension pot, people aged 55 and over will be able to take their pension how they wish to, subject to their marginal rate of income tax in that year.

They will also be offered free, impartial guidance to help them decide what they want to do with their pot.

More than one fifth (23%) of people aged over 55 said they are planning to release their retirement savings and invest them in their family, for example by helping their children to get on the property ladder.

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Separate figures released by the Office for National Statistics (ONS) yesterday show that a typical first-time buyer faces having to pay 11% more to purchase a home of their own than they did a year ago.

People with grown-up children still living at home were even more likely to say they plan to spend their retirement savings on their family, with 25% saying this, according to the Scottish Widows think-tank.

Meanwhile, 22% of people aged over 55, rising to 23% of all age groups, envisage putting their retirement savings towards funding the care costs of elderly relatives.

Spreading their retirement wealth more widely across the generations is expected to have a knock-on impact for people's own financial situations later in life, with 39% of people believing that they will have to rely more on their family as they will not have enough money left over to see themselves through their old age.

The report suggests that parents will increasingly look to their children to plug the gap that loans and investments from an unlocked pension pot may leave in their retirement savings. More than four in 10 (41%) of adults believe that children have an obligation to support their parents.

However, 23% of people surveyed think that the new freedoms will enable to manage their retirement savings more effectively, and will result in them relying less on their family.

Carolyn Fairbairn, chairwoman of the Centre for the Modern Family, said that although people can expect to have greater autonomy over how they use their savings later on in life, it is important to consider the potential impact for families.

She said: "Many may feel pressure to access their pots to support struggling family members in an already challenging economic environment.

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"While it is reassuring that family members are seeing the importance of pulling together in this way, it is vital people are aware of all the short and long-term implications for retirement pots, and for policy makers and insurance companies to help people make an informed decision about how to best use their savings and manage their income in retirement."

A Treasury spokeswoman said: "The Government believes that people who have worked hard and saved all their lives should have the freedom to decide how to use their savings and the guidance to help them make good decisions.

"People will have access to a new guidance service that will be delivered to rigorous Financial Conduct Authority standards, and empowers and educates people so they can make their own, informed choices and confidently engage with the pensions industry."

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