“Bank of Gran and Grandad” sees pension withdrawals amongst over 75s jump by a third in a year
• 92,000 individuals aged 75 and over made withdrawals last year to help pay grandchildren’s home deposit and education
Increased lending by the “Bank of Gran and Grandad” has driven the number of over 75s to take lump sums of their pension pot to rise by a third in a year, says Salisbury House Wealth, the leading financial advisor.
92,000 individuals aged 75 or over withdrew cash lump sums from their pension in the year to June 30 2020*, a 33% increase on the year before. Salisbury House Wealth says it is the fourth consecutive year in which the number of over 75s taking money out has increased.
Salisbury House Wealth says a big driver in the increase is the increasing generosity of the “Bank of Gran and Grandad” as more grandparents gift money to their grandchildren each year, particularly to help with a deposit to get onto the property ladder or to pay for their University education. The financial advisor says it is often overlooked that baby boomers are making these very big transfers of wealth to the millennial generation and generation z.
Rising property prices have made it increasingly harder for young people to buy their first home. The average price for a UK property rose to a new record of £245,000 in August. The rising prices, combined with relatively slow wage growth over the last decade, have made accessing funds to put down a deposit for a home difficult for many young people. The average UK deposit for first time buyers now stands at over £47,000***.
Salisbury House Wealth says the coronavirus pandemic and the subsequent economic recession has hit young people the hardest. The sectors to have been worst affected by the pandemic, such as hospitality, travel and retail, typically employ large numbers of young workers. The financial advisor says there could therefore be a further increase in the number of grandparents withdrawing money in the coming year to help out their relatives who are in a less fortunate position.
Salisbury House Wealth says another reason for the rise in over 75s taking money out of their pension is that if an individual dies after the age of 75, they cannot pass their pension on tax-free. The financial advisor says that many over 75s are now choosing to make withdrawals to gift money to their relatives to avoid this. This means that younger relatives can receive a higher amount of money that they will not be taxed on.
Tim Holmes, Managing Director at Salisbury House Wealth, says: “More and more over 75s are taking money out of their pension to help family members. With coronavirus hitting the younger generation hardest, we expect to see withdrawals rise even further.”
“As property prices continue to climb, the Bank of Gran and Grandad is vital in helping millennials get a foot on the property ladder.”
“There are taxable benefits for making an early withdrawal too. For pensioners concerned about their family being hit with a huge tax bill on their pension later down the line, withdrawing money now to gift to relatives could be a smart move.”
*Source: HMRC, year-end date June 30
Notes to Editors
Salisbury House Wealth is a leading financial advisor founded in 1986 and based in Leicester
Salisbury House Wealth offers specialist professional advice to high net worth and mass affluent individuals on a range of financial products. These include mortgage and pension plans, investment programmes, inheritance tax plans and life insurance.