Marvin OnumonuRising financial pressures have prompted 13% of retirees to reduce financial support to children and grandchildren, according to research from Quilter.
This rose to 16% among younger, higher-income retirees and 15% among those on lower incomes.
On average, retirees spent just over £2,500 a year supporting younger relatives, including £1,323 in gifts and £1,175 for education.
Higher income retirees gave well above this amount, with younger, higher earners gifting an average of £4,836 and a further £5,280 towards education each year.
Many retirees have been gifting more than the current annual allowance of £3,000.
Quilter called for a rise in the allowance to at least £9,000 to help families transfer wealth more easily.
Shaun Moore, tax and financial planning expert at Quilter, said: “Retirees provide a vital avenue of financial support for younger generations, helping with everything from education to deposits for first homes.
“If the bank of mum and dad, or even the bank of gran and grandad, begins to close its doors, the ripple effects could be felt across the housing market, education system, and the wider economy.
“The gifting allowance is a relic of a different economic era. Even a modest increase to £9,000, for example, would better reflect modern financial realities, ensure it aligns with existing savings vehicles such as the Junior ISA, and could allow families to support one another more freely and purposefully.”
Moore added: “The rumour mill is already in overdrive as we near the Chancellor’s upcoming budget and has so far seen a potential lifetime cap on gifting, an extension to the period donors must live after making a gift before it falls outside of their estate for IHT purposes, and the potential for a further freeze on the nil rate band all debated.
“While none have been confirmed, the government will clearly be trying to fill a hole in its finances. However, any reform in this area must ensure families can continue to provide support without fear that normal acts of generosity will be swept into the IHT net.
“Any review of gifting rules should be considered alongside the outdated gifting allowances.”
He said: “A modernised allowance would support financial planning, reduce reliance on the state and help unlock economic potential.
“With pensions soon falling within the IHT net, generating a considerable uplift in revenue, this reform would be a modest concession for a meaningful economic gain.
“If the government’s goal is to foster a high-growth, investment-led economy, then reducing friction around intergenerational wealth transfer is not just aligned with that vision, it is essential to it.”
