The parents taking lump sums from their pensions to fund their children’s homes and weddings

The Bank of Mum and Dad has been around for centuries – but in recent years, even more adult children are relying on their parents for financial support. Now, the average contribution among adults receiving parental financial support stands at £11,241, according to the savings app, Spring, whilst others offer much more. Four in 10 recipients say the cost of living crisis is driving the need for parental support. Shorts Paul Biggerstaff, 61, is one such parent. He has spent £18,000 worth of his savings helping his two daughters Sophie, 31, and Katie, 28. The IT solutions director, who lives in Crawley, West Sussex, believes it’s important to support children financially, giving them the best start in life possible. He has gifted them both around £4,000 towards legal fees to help them buy their first home and £10,000 to Sophie, who works in SEO, towards her wedding. He plans to help out Katie with a similar amount her wedding. “I think helping my child financially has always been on my mind. You want to see them do well and help them, especially with the first step of the property ladder,” he said. “I’ve worked all my life and obviously it depends on your situation at the time but I wanted to do it.“It shows your commitment as a father too.” Paul funded the gifts through a mix of his savings and inheritance. He also took a tax-free lump sum from his pension once he was 55, using it towards plans for his retirement. “I paid into my pension from early on and I have a reasonable amount there, so it made sense to make the most of the tax-free lump sum rather than getting a mortgage on our property in Portugal,” he added. Paul decided to downsize from his four-bed home in Farnborough where he lived with his second wife a couple of years ago. The couple, who’ve been married eight years, sold the property three years ago and moved into a two-bed flat in Crawley, as they plan to retire abroad. This helped reduce their monthly outgoings by 20 per cent per month. Paul Biggerstaff has gifted much of his savings to his children – and will likely give more in the future “The house was quite big and we realised we couldn’t live there and pay off the mortgage without working for longer. “With the cost of living so high in the UK at the moment, it made sense to use the money to buy a home in Portugal.” They bought a four-bed house in Ourém, Portugal. “We’ll be able to have the same kind of lifestyle as we have here, but it will cost less. I’m not too sure when I’ll retire, maybe in two or three years. Paul says he didn’t think too much about the financial impact of giving gifts to his children. “It meant a lot to me and I suppose a lot to them to help them”, he said. “You love your children and you want to do everything you can for them.” Earlier this year, The i Paper spoke to Lou Valdini, 71, who revealed he has already provided £105,000 in financial support to help his son buy a house and said he will dip further into his savings to help his daughter as well. “The original idea was I would leave my SIPP [self-invested personal pension] pot sitting there and what would be left of it would go to my children,” Lou said. He is now aiming to avoid his estate being pushed over the inheritance tax threshold, so the original plan has changed. Lou draws just below £50,000 a year from his pension, but he is also concerned that pension rules could change again, which would require another rethink of his retirement planning. He said: “My children always say they don’t expect anything from me but the whole reason I bothered to save is to leave something to them and that’s what I want to do.” Lou Valdini, 71, from York, has given much of his finances to his children and wants to give more, partly to avoid large IHT bills in future How to help your children financially without impacting your finances If you’re keen to help your children financially as you approach retirement, it’s important to factor in your own situation. Around 7 per cent of non-retired adults aged 18 to 69 expect an inadequate standard of living in retirement, according to Legal & General. The key is to start planning early. James Shattock, from L&G, said: “For many people, retirement is not a single life stage but a journey that can span several decades. “That’s why decisions about supporting family and loved ones should be part of a wider long-term financial plan to ensure retirement savings can support their own changing needs throughout later life.” There is also the risk that you might need the funds back in later life – with one in 10 retired people saying they might need the money back, according to a study by Investec. The average amount they might want back is nearly £7,000. To avoid this, firstly, work out your own retirement budget first. Work out what your pension and other income will cover, then keep a cash reserve for unexpected costs, including potential care needs. Only offer money you can comfortably spare. If you do decide to help your children, then it’s worth checking tax rules first. Susan Hope, retirement expert at Scottish Widows, said: “Tax and inheritance rules can be complex, so what seems like a simple gift today could have consequences later. Think about whether taking financial advice would help for your situation.” There are inheritance tax rules to consider when giving money to children. You can give away a total of £3,000 each tax year without it counting towards the value of your estate, and carry forward any unused allowance for one year. Parents can also give a child up to £5,000 tax-free as a wedding or civil partnership gift, on top of the annual allowance. Giving more than these amounts does not mean an immediate tax bill. But gifts that are not covered by an exemption could count towards your estate if you die within seven years, potentially increasing the inheritance tax owed. Regular gifts from spare income can also be exempt, provided you can still afford your usual living costs. Next, you should think about getting independent financial advice before doing anything that could impact you long term. If you’re over 55, you can get free advice from Pension Wise in regards to your retirement. If you can’t afford to give financial support there are alternatives you can consider. Sarah Coles, head of personal finance, at AJ Bell, said: “If you are phasing into retirement, you may be able to support them with your time, which can be invaluable when it comes to things like childcare. “If you live near them and they’re struggling to raise the money for a property deposit while renting, they may be able to move back in with you for a while. “Sometimes non-financial support can be just as welcome as reopening the Bank of Mum and Dad.”