Financial support from grandparents to younger generations is worth £500m a year and is set to grow in future, according to new research.
New research by the International Longevity Centre-UK highlights how grandparents are playing an important role in supporting the financial wellbeing of future generations.
The research, supported by Key Retirement Solutions and Partnership, is explored in a new report entitled "Grandparental Generosity" which looks at the levels and patterns of financial support from grandparents using the 2010 wave of the English Longitudinal Study on Ageing (ELSA).
The research reveals that:
· Just under 2.5 million grandparents in England aged 50+ (one in five) gave money to their grandchildren;
· Contributions to Child Trust Funds (CTFs), tax-free savings accounts for children available from 2005-2010, were made by a small percentage (3.99%) of grandparents;
· Across England, grandparents gave a cumulative total of almost £333.8 million to their grandchildren in 2010. Contributions to CTFs were of a similar amount, at £313.8 million in total.
The report paints a picture of which grandparents are more likely to give financially to their grandchildren:
· A higher proportion of grandparents aged 75-79 gave than from any other age group and 80-84 year olds gave the highest amount on average.
· Grandparental givers are also more likely to provide care for their grandchildren, and be female and married rather than separated or divorced.
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The research reveals that grandparental givers are typically well-off relative to non-givers reporting higher levels of income and financial wealth. They also had substantially higher income from annuitised sources like private pensions. Degree holders gave a much larger amount on average compared to the other groups.
Brian Beach, research fellow at ILC-UK said, "This research reveals that millions of grandparents are providing financial support to younger generations. For grandchildren, these transfers are likely arriving at a crucial transition point, impacting educational and housing opportunities. As people live longer and society ages, grandparental giving may have an increasingly important impact on the social mobility of grandchildren."
Ged Hosty, managing director of equity release at Partnership, said: "As families become increasingly financially stretched and time-poor, grandparents are stepping in more and more to provide support. However, while this trend is to be welcomed as it helps to draw families closer together, it can put a strain on the grandparents finances that they may struggle to recover from.
"Therefore, it is vitally important that people consider all their assets – including their homes - ahead of retirement and take steps to ensure that they can provide as much help as needed without detriment to their own retirement aspirations."
Dean Mirfin, group director, Key Retirement Solutions said: "It is evident that with extended generations increasingly amongst today's population that grandparents are opting to help with their grandchildren, not just in terms of time but also financially.
"Grandparents in many cases are taking a pragmatic view with regard to this financial support seeing it as inheritance at a time when money is needed most or has the potential to most influence the financial well-being of the rest of their families. For many being there to witness the impact of their support is a key driver to gift at the right times, and to direct how that support is used, and this is a trend we expect to see continue."
The Report "Grandparental Generosity: Financial transfers from grandparents to grandchildren" was published on the ILC-UK website this week.