I went back to work at 70 to help fund £40,000 school fees for my grandchildren

Nigel Backwith thought his working days were over – but at age 70 he suddenly found himself back at a desk five days a week. Nigel, now 76, returned to his role as a management consultant for four years to help pay the school fees for his grandchildren, Tommy, now 22, and Emily, 18. “Education has always been hugely important in my family, so when my daughter Sian asked if we could help, I couldn’t imagine saying no,” he says. Shorts Nigel, who lives with his wife Gill, 66, in the Wirral, Merseyside, estimates that his return to work enabled him to contribute about £40,000 to his grandchildren’s education. In time, he also plans to do the same for his son’s children. “Going back to work was a no-brainer. I did it for two reasons: the fact my pension pot needed to be larger, and also that I wanted to be able to fund the tuition fees out of income rather than drawing down from my pension,” he says. More parents and grandparents are sacrificing their own wealth – and in some cases delaying retirement or returning to work – to help younger generations with education, house deposits and living costs. A quarter of parents have dipped into savings to help financially support children, according to Standard Life. Meanwhile, one in four parents and grandparents expect to retire with less after supporting children’s and grandchildren’s university costs, with nearly a quarter delaying retirement, according to wealth management firm Rathbones. The findings reflect the growing role of the “Bank of Mum and Dad“, with many families choosing to help children and grandchildren much earlier in life. But before doing so, experts say it’s worth making sure the support won’t derail your own financial future. For example, say you gave a child £50,000 for a house deposit from your savings when you were 60. If, instead, you left the money invested until 67, it could’ve grown to £76,018, based on annual growth of 6 per cent. Parents must weigh up whether it is worth sacrificing that growth to help relatives sooner. Nigel had initially stopped working in 2010, but after divorcing his first wife, he did not retire with as much saved as he would have liked. Going back to work gave him a chance to bolster his pension pot as well as help his grandchildren. While he didn’t contribute any extra to his pension, which he manages through Pension Bee, having a regular wage meant he didn’t have to dip into the pot, so it could grow. He says: “The pension fund ticked up nicely. It meant I was able to leave the pot to its own devices and lived off earnings, dipping into savings to fund the education.” When Nigel finally retired for good in 2014, he was in good financial shape and the couple enjoy a more comfortable lifestyle in the modern, four-bedroom detached house near Gill’s family. Does he regret having to go back to work? Absolutely not. “The pride in being able to help and watch the next generation grow and be the best they can be is reward enough,” he says. “My grandson just got a first in his Architecture degree from the University of London and is moving on to become an architect. I don’t think that would’ve happened if we’d not helped.” How to help your family Take a look at your finances and assess whether you can afford to help using money from savings or surplus income. Making gifts during your lifetime rather than as an inheritance can be more tax-efficient. Ed Wood, financial planning director at Rathbones, says: “Every situation will be different but, if you can afford to make some gifts, then for most people it makes sense. “Look at how much you’re spending and whether you can make the contribution without impacting your own retirement, or what might be affordable.” Consider whether you plan to offer the same financial contribution to every child or grandchild, and how this might work. Be sure to keep in mind your own plans for the future and how much you might need. You can give away up to £3,000 per tax year free of inheritance tax and you can give small gifts of £250 per tax year to other recipients. Larger sums can be given tax-free as long as you live for seven years after making the gifts. A lesser-known rule means that regular gifts made from surplus income may immediately fall outside of inheritance tax liabilities. To qualify, the gifts must be regular and cannot affect your standard of living. Ian Dyall, head of estate planning at Evelyn & Partners, said: “I think parents are wary about giving away money early, but regular gifts may feel more comfortable. Helping kids with fees and education costs can be done on a drip over time.” Another option is to withdraw cash from your pension to use for helping family members. Usually it is possible to take 25 per cent of your pot as a tax-free lump sum from age 55 (rising to age 57 from 2028). However, this could mean you retire with less in the future and may not be the most efficient use of the money if you have other savings pots. Wood explains: “Pension funds can grow tax-free and that’s something to be wary of when taking a lump-sum.” Before making any decision, it can be wise to speak to a financial adviser to make sure you understand how it could impact your retirement income and any potential future inheritance tax liability.