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Grandparents: does your generosity leave you at risk of running out of money?

Posted by jdavis on December 31, 2015

Money typically flows down through generations.  This is the way it has always been and our natural life cycles have ensured it is likely to be that way for the current retirees.  (I'm not sure about the next generations though, given society's huge debts.)

If you are a parent, you will initially support your children, before eventually leaving them an inheritance.  Grandparents may have finished supporting children and have no need to support grandchildren.  However, there will still be an inheritance to think about and many grandparents like to give grandchildren financial gifts at various points during their lives.

A new study * has put some numbers around this flow of money down through generations.  Surveying the public in September 2015, the study found that nearly a third (32%) of grandparents plan to make a financial gift, with the average value of gifts given totaling £5,026 per year. 

Of those giving a gift, just below one in five (18%) plan to use the new pension freedoms to withdraw from their pension, before passing the money on.

Whilst the new pension freedoms allow exactly this sort of flexibility, this does create further questions for retirees.

With potentially unrestrained access to pensions, how can you be sure you are not giving away too much?  How much will you need to live your life in retirement? 

How can you

  • manage cashflow
  • do all that you want to do
  • give a little away as gifts

AND not run out of money?

Some of those who are gifting money seem to be aware of these problems, with 18% saying they are worried they are giving away too much and 11% saying they have cut back on their lifestyle in order to give more away.  (Why would you want to cut back on YOUR lifestyle - other than for a very good reason?)  Of those cutting back, various sacrifices were specified including travel (50%), meals out (42%) and home improvement plans (39%).

Whilst it is great to be able to support future generations, your retirement should primarily be ABOUT YOU.  Carefully planned gifting (of appropriate amounts) can be achieved alongside your retirement plan, but a careful approach should be taken to ensure you do not run out of funds. 

If you are concerned that you may be in this situation currently then do contact us.

We’ll be happy to discuss everything to do with your retirement; from gifts and an inheritance to living a full and exciting later life!

Source*: investec.co.uk


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