Bank of mum and dad sac­ri­fic­ing pen­sion pot

Western Mail - - PERSONAL FINANCE -

ONE in five par­ents with adult chil­dren have used cash orig­i­nally in­tended for their pen­sion to help their off­spring, a sur­vey has found.

Some 19% of those sur­veyed for Pru­den­tial had taken money out of their pen­sion fund or sac­ri­ficed sav­ing for their re­tire­ment to help their chil­dren fi­nan­cially.

A fur­ther 19% have also made cut­backs to their life­styles so that their cash could go to their chil­dren.

Nearly three-fifths (59%) of those who have lent money to their off­spring have later de­cided to write off some or all of the debt - with a gen­er­ous third (34%) hav­ing writ­ten off the whole lot.

Three quar­ters (75%) of par­ents who have loaned money did not im­pose any con­di­tions or spe­cific re­pay­ment terms on their loans, de­spite 77% ini­tially ex­pect­ing to be re­paid in full.

Kirsty An­der­son, a re­tire­ment in­come expert at Pru­den­tial, said: “Whether it’s help­ing with a de­posit to buy or rent a house, or clear­ing stu­dent debt, the Bank of Mum and Dad plays a vi­tal role in the fi­nances of younger peo­ple.

“How­ever, it is im­por­tant that par­ents re­mem­ber to con­sider their own fu­tures when de­cid­ing on mak­ing loans to their fam­i­lies - for ex­am­ple, money taken now from sav­ings and in­vest­ments in­tended to pro­vide for re­tire­ment could make a real dent in your in­come when the time comes to give up work, es­pe­cially if you even­tu­ally have to write off all or some of the loan.”

Pru­den­tial’s re­search also found those par­ents who ex­pect to be even­tu­ally re­paid are giv­ing their chil­dren a gen­er­ous amount of time to pay off their loans.

Nearly a third (31%) ex­pect re­pay­ments to take up to three years, and one in six (16%) ex­pect to wait be­tween three and 10 years be­fore the money is back in their ac­counts.

More than 1,000 par­ents with chil­dren aged over 16 years old were sur­veyed.

> Al­most 20% of par­ents have made cut­backs to give cash to chil­dren

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