Claire Singleton, CEO of Legal & General Home Finance
Parents and grandparents have long been a vital source of funds for the younger generation to get on the property ladder. Last year, however, the pandemic placed an even bigger financial burden on the ‘Bank of Family’, as rising numbers of young people lost their jobs because of Covid-19. Recent research from Legal & General found 5.5 million parents offered an additional £353 a month in financial support to younger family members due to Covid-19. Nationally, this accounts for an extra £1.9 billion being passed between generations.
This Covid-19 specific support comes in addition to ongoing financial support provided by older family members. According to our research, over a third of young adults, around 3.3 million people, receive regular financial support from their relatives and often depend on it to cover their monthly outgoings. This routine support can be crucial for many, with some using it to pay for bills and everyday essentials, as well as ‘big ticket’ purchases like a first home. This transfer of wealth is clearly a careful balancing act for the older generation financially, but it can be beneficial to everyone when done properly.
The ‘Bank of Family ’ will continue to play a major role in supporting young adults, but the current pandemic means the older generation may have their own pressures on savings or income that make supporting a loved one an additional challenge.
Many people are considering alternative assets when looking at how best to provide additional financial support to relatives. Using property wealth allows them the opportunity to give a living inheritance without impacting income or savings. Legal & General has found that, of its equity release customers, approximately 1 in 6 will use part of their payments to support gifting. As more people become open to the idea of unlocking property wealth, it has the potential to be a vital tool to achieve not only their ambitions, but those of their wider family. Ensuring your clients take an holistic view of their wealth can enable them to provide the much-needed support their loved ones need, while still allowing for a comfortable retirement.
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