Families are increasingly draining grandparents' pensions to subsidise costs of childcare and debt repayment, according to new research by engage Mutual Assurance.
Despite growing concern over a pensions shortfall1, and women feeling increasingly compelled to return to work to ensure financial security2, the research reveals that the percentage of retirees subsidising their grandchildren's care has more than doubled in the last three months - more than one in five (21%) retired grandparents contributing to childcare costs in the six months preceding October, compared to one in ten (10%) in July.
Furthermore, regardless of reports of increasing indebtedness in retirement3, the proportion of retired grandparents helping their grown-up kids pay off debt in the last six months increased from 16 to 20 percent between July and October.
As part of its 3GB campaign4, engage Mutual Assurance asked a GB representative sample of 4,500 adults5 how they had supported family members financially in the last three months. The results reveal how financial dependencies are tying generations together, grandparents providing invaluable support to the younger generations.
Grandparents Helping Parents
- Overall one in two (50%) grandparents have subsidised the costs of bringing up their grandchildren in the last six months, with one in five (20%) contributing to cost of childcare.
- The most common forms of financial support provided by grandparents are helping with childcare costs (20%) and debt repayment (20%).
- Almost one in five (19%) of grandparents have helped their grown up children cover the costs of their family home, assisting with mortgage repayments, deposits on a new home or funding home improvements.
- With previous research6 by engage Mutual Assurance revealing that one in five (20%) parents have no idea how they'll afford their children's higher education, this research reveals that four percent of grandparents helped to cover education costs in the last six months.
- The proportion of working grandparents subsidising childcare in the last six months has remained constant at 18 percent between July and October.
- Despite increases in those liable to pay inheritance tax7, just three percent of grandparents have given their grown-up children a stake in their house in order to avoid inheritance tax.
- Regionally, Grandparents in the South are most likely to be contributing financially towards younger generations, 28 percent helping to cover the cost of childcare in the last 6 months, compared to 20% nationally, and 29% helping their grown up children to pay off debts compared to 20% nationally.
Returning the Favour
Despite reports that OAPs are finding it increasingly difficult to meet rising costs of living8, it would appear that younger generations are not returning the favour. Just five percent of Britons with retired parents have helped to pay their utility bills in the last six months, seven percent giving them money to supplement their pension.
Karl Elliott, 3GB spokesperson for engage Mutual Assurance commented:
“With money issues becoming an increasing concern in modern Britain, this research shows the important role families play in providing financial security. Despite concern that old age pensioners are unable to afford retirement, grandparents continue to make a valued contribution to extended family finances. .”
“Child Trust Funds offer grandparents, as well as parents, an opportunity to contribute financially to their grandchildren’s future. Our research shows that seven percent of grandparents have made a one off payment into their grandchild’s CTF, making an investment which will help to secure their grandchild’s financial independence once they reach adulthood”
Footnotes:
1 BBC Online, 4th October 2006, www.news.bbc.co.uk/1/hi/business/5403354.stm2 The Daily Telegraph, Wednesday 25th October, 2006 www.telegraph.co.uk/news/main.jhtml?xml=/news/2006/10/24/nmum24.xml
3 BBC Online, 11th February 2006, www.news.bbc.co.uk/1/hi/programmes/moneybox/4704414.stm
4 3GB or '3 Generation Britain' is an ongoing quarterly research initiative by engage
Mutual Assurance to understand how financial ties impact on family relationships. More information is available at www.engagemutual.com
5 1,059 of the respondents had grandchildren
6 Research undertaken by engage Mutual Assurance in March 2006 across a GB representative sample of 2,000 (press release available separately)
7 The threshold for inheritance tax has risen by 85% since 1996 (BBC Online, September 2006)
8 BBC Online, 17th October 2006, www.news.bbc.co.uk/1/hi/business/6059558.stm
engage Mutual Assurance can be contacted on 0800 169 4321 or by visiting www.engagemutual.com
The information contained in this press release is intended solely for journalists and should not be relied upon by private investors or any other persons to make financial decisions.
Jo Winser/Guy Bellamy
FD Consumer Dynamics
020 7269 7236 / 020 7269 7265
jo.winser@fd.com / guy.bellamy@fd.com
Notes to editor:
1. If using this article on a website, please link to www.engagemutual.com using the following hyperlink text : engage Mutual Assurance - meeting the changing needs of today's modern families
2. engage Mutual Assurance is a trading style of Homeowners Friendly Society (HFSL) and it's wholly-owned subsidiary engage Mutual Funds Limited (EMFL).
3. engage Mutual Funds Limited (EMFL) is a provider of the Child Trust Fund direct and in partnership with partners including Legal and General, ASDA and Debenhams stores and NAAFI Financial.
4. The organisation is title sponsor of the engage Super League - which sees 12 teams from across the UK and France battling for a place in the engage Super League Grand Final at Old Trafford stadium in Manchester. The teams are Leeds Rhinos, Wigan Warriors, Bradford Bulls, Castleford Tigers, St Helens, Huddersfield Giants, Hull FC, Salford City Reds, Wakefield Trinity Wildcats, Warrington Wolves, London based Harlequins RL and French team Catalans Dragons.
5. engage is proud to partner a charity which shares our consideration for balancing risk and reward - Smart Risk Foundation UK. It helps youngsters across the UK to identify the risks in their everyday lives in the smartest way, so that they can enjoy life to the fullest. Smart Risk Foundation's registered charity number is 1096081, www.smartrisk.org.uk.
6. engage Mutual Assurance is headline sponsor of the engage International Open 2006 and the engage Ladies World Matchplay 2007, both part of the World Bowls Tour.
7. engage supports mutuality, friendly societies and the regional financial services industry through links with the Association of Mutual Insurers, the Association of Friendly Societies, Mutuo and Leeds Financial Services Initiative.
8. Established in 1980, Homeowners Friendly Society Limited (HFSL) is Registered and Incorporated under the Friendly Societies Act 1992, Reg.No.964F, it's wholly owned subsidiary engage Mutual Funds Limited (eMFL) is Registered in England No 3224780. Both are authorised and regulated by the Financial Services Authority (FSA). 9. Homeowners Friendly Society Limited's FSA Register number is 110072 and engage Mutual Funds Limited's FSA Register number is 181487. You can check this on the FSA's Register by visiting the FSA's website www.fsa.gov.uk/register or by contacting the FSA on 0845 606 1234