34% of people planning to retire this year are financially supporting family members, contributing an average of nearly £260 a month and adding to the squeeze on their retirement incomes, according to new research from Prudential.
Financial dependants of this year’s retirees are most likely to be their children and their children’s partners (45%), followed by their grandchildren and their partners (24%), with their parents making up 9%, and a surprising 5% being their grandparents.
The findings are part of Prudential’s annual research into the finances, future plans and aspirations of people planning to retire in the year ahead. This year’s retirees – the Class of 2017 – provide the tenth annual set of comprehensive insights into the post-financial crisis retirement landscape.
On average those retirees who provide financial support to loved ones give money to more than four people, and among the most common reasons are, help covering everyday living costs (22% of retirees who support dependants), and paying some or all of regular household bills (14%). Meanwhile, one in five retirees who support their dependants (20%) pay for one-off large purchases such as a holiday or new car, and (11%) cover non-essential costs such as club memberships and subscriptions.
Prudential says the figures further suggest that the demands on the finances of this year’s retirees are intergenerational. Nearly one in every 14 of those providing financial support (seven%) do so to pay housing costs, most likely to be for their younger dependants, and a similar figure help to pay for long-term care, most likely to be for their older dependants.
Kirsty Anderson, retirement income spokesperson at Prudential, said: “With life expectancy increasing rapidly it is not unreasonable to expect the members of the Class of 2017 to be looking forward to a retirement that will last 20 years. However, for those providing financial support to their dependants it is likely to cost them an average of £62,000 over the course of their retirement – accounting for a significant proportion of their pension pot and impacting the income they can expect to live on.
“The money you give to support your loved ones is an element of retirement budget planning that is easy to overlook, and when looking to understand the likely amounts of money you’ll need in retirement, the help of a professional financial adviser or independent guidance from the likes of the Pensions Advisory Service could prove to be invaluable.
“For most people who are still in work it is never too late to make a difference to the quality of retirement you can look forward to. Saving as much as possible as early as possible in your working life should give you the best possible opportunity to build a substantial pot to support you and your family in the future.”
Although new retirees’ incomes are squeezed by providing financial support to dependants, this is not stopping them from expecting to leave an inheritance. 34% plan to leave an inheritance, up from 28% among last year’s retirees, and those planning to retire this year who expect to leave an inheritance estimate that the average amount they will bequeath will be just over £173,000.