With financial pressures such as day-to-day living costs fuelled by inflation, expensive property, and education fees, retirees are increasingly expected to give their grown-up children, family members, and friends some financial help.
A growing trend among retirees
Although most retirees will be in their 50s, 60s, and 70s or more and less likely to have dependent children, research shows that nearly 40%[1] of those surveyed support grown-up children, a spouse or partner, a parent, an elderly relative, or a friend. It is fair to say that many people have been struggling with rising costs over the last few years, and it’s perhaps not surprising that most of that support has gone towards day-to-day living costs.
Following this, helping with house buying, wedding costs, education, or university fees are common reasons for offering financial assistance. Advancing an inheritance and covering care or medical costs were other major motivations for providing support, too.
Finances and setting realistic boundaries
Thankfully, helping their children is something many retirees are happy about, with almost half (47%) saying it’s very important or essential to be able to do that throughout their lives. If helping your children and other loved ones throughout your lifetime is important to you, there are some things to consider carefully. Your money has to last as long as you do to support yourself throughout your retirement, however long that might be. If the money you’re giving to loved ones was an unexpected outgoing, do you know the impact that might have on your financial goals?
Balancing the desire to help with the need to maintain your financial stability is crucial. Having a clear understanding of your finances and setting realistic boundaries for how much you can afford to give will ensure your and your family’s needs are met. Additionally, transparent communication with your loved ones about your financial limits can prevent misunderstandings and ensure everyone is on the same page.
Making your money work harder
We can help you devise plans to make your money work harder and recommend the best ways to use tax allowances to minimise the amount of tax you may incur. This could be achieved through estate planning, which aims to reduce or, where possible, avoid Inheritance Tax (IHT). Another approach includes reviewing your pension and other savings to ensure they are being utilised in the most tax-efficient manner.
We’ll also consider your individual needs and circumstances to prepare a recommendation that helps you plan for a financially secure future. This personalised strategy ensures that your financial goals are met effectively.
Planning for your legacy
Around three-quarters (76%) of those surveyed expect to leave an inheritance of some kind to their children. They want the next generation – and sometimes a wider family – to benefit from financial support after they’ve gone and during their lifetime. This necessitates having a plan to ensure you have sufficient funds left.
Ensuring you have an up-to-date Will that reflects your wishes is crucial. It’s equally important to consider any pension you may leave behind and whether you have a beneficiary who will receive some or all of your pension after you die.
Pension management and beneficiaries
Pensions aren’t normally covered by a Will, so you’ll need to complete a ‘Nomination of Beneficiary’ form with your pension provider – or providers if you have more than one pension – to guarantee any pension savings go to the individuals you intend them for. This process can usually be done online for convenience.
Regularly reviewing your beneficiaries and ensuring all address details are current is vital, especially if circumstances change, such as having more children or getting divorced. This ensures that your wishes are accurately executed.
Tax implications and efficient transfers
Those who inherit your pension savings typically pay income tax, so what they withdraw and when they do it can significantly impact the actual amount they receive. We provide guidance on passing your money and pension savings on in the most tax-efficient way, including managing any IHT liabilities.
Our expert advice aims to minimise tax implications and maximise the benefit for your loved ones. By navigating these complexities, we help preserve your financial legacy effectively.
Source data:
[1] Data from the Great Retirement report by the Wisdom Council, in association with M&G - 17/05/24
THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.