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From furlough to redundancies, the Covid-19 pandemic has impacted a huge proportion of society in terms of their finances. The Bank of England has warned that UK unemployment will hit 2.5 million,1 while analysis from foodbank supporter The Trussell Trust forecasts a 61% increase in food parcels needed across its UK network in October to December, equating to six food parcels needed every minute.2
One demographic seeking to reduce the financial impact of Covid-19 is older family members, 5.5 million of whom are expected to provide additional financial support to younger family members as a direct result of the pandemic, according to new research from Legal & General Retail Retirement (LGRR). This means an additional £1.9 billion could be given to family, by family – or by ‘Generation gift’ – throughout the pandemic.
This isn’t the first time that parents and older family members have stepped in to support loved ones. More property purchases are being funded by loved ones in 2020 than 2019. Our Bank of Mum and Dad (BoMaD) report reveals that loves ones are supporting the purchase of 73,000 properties for first-time buyers aged under 35, with the average receiving £19,000 from loved ones. Those over 35, meanwhile, make up for 61% of BoMaD’s lending in 2020, equating to £2.14 billion.
Older family members are already spending £327 million a month on regular financial family support, and more than a third of beneficiaries depend on these contributions to get by. More than a quarter use these gifts for everyday essentials and a similar number use them to pay their bills.
Yet of the 50% of adults who have received financial support from a loved one this year, many have required further support. Some 16% have utilised the government’s furlough scheme, 15% moved back to their family home to live rent-free and 13% taken out a one-off loan. In fact, over the last two decades, the ONS has shown there has been a 46% increase in those aged 20 to 34 living with their parents, totalling 3.4 million people.
There is a risk that people could be underestimating what they need to fund a comfortable retirement, and therefore it’s important to gift sensibly.
Despite monthly contributions of £327 million, 15% of older family members expect to provide additional financial support as a direct result of Covid-19. And more than a third of those who offer financial gifts to family members have made sacrifices in order to do so, with a fifth admitting to struggling to pay some bills as a result. But even with 62% giving away money knowing they can maintain their current lifestyle, this is money that most people have worked hard for all their lives, setting aside so they can truly enjoy their retirement and guarantee themselves a secure financial future.
Younger people relying on loved ones for financial support, and loved ones therefore compromising the quality of their lifestyle and retirement, is a sign of both the Covid-19 economy and wider societal inequality that a society focused on inclusive capitalism can seek to address. But be that as it may, most of ‘Generation gift’ are more than happy to help out loved ones – it’s just important they don’t limit their own experiences in the process.
“Most parents and grandparents will gladly help out when they can, but people are often making personal compromises to provide this support,” explains Claire Singleton, CEO of Legal & General Home Finance. “Utilising property wealth, by either downsizing or using equity release, can often be helpful here as it allows the opportunity to give a living inheritance without touching your income. Giving money to a family member has the potential to be a special experience, but the key is not to lose sight of your longer-term plan. There is a risk that people could be underestimating what they need to fund a comfortable retirement, and therefore it’s important to gift sensibly.”