As retirees will soon have the option to cash in their entire pension pot in one go, over 200,000 over 55s are weighing up their options.
Paying for holidays, DIY projects and paying off debts are amongst popular contemplations for the lump sum, however new research has delved further into intentions to set money aside for family support.
Fidelity Worldwide Investment has discovered that 22% of those intending to take advantage of new pension freedoms for retirement in 2015 will do so in order to financially support the younger generation (children and grandchildren). 55% of those people will help their children get onto the property ladder, giving a helping hand with house deposits.
Furthermore, 40% will use the money to help with educational fees, and 26% will help to pay off their children’s debts.
The ‘Class of 2015’ report highlights that over 55s largely believe they will be better off in their pensioner years than today’s younger generations when it comes to funding their retirement. For this reason, many see the opportunity to use pension freedoms to help.
The top ‘biggest challenges for the younger generations’ and the main reasons why the Class of 2015 believe they will be better off include the rising state pension age, prioritising getting on the property ladder over saving for retirement, and the rising cost of ‘living squeezing savings’.
Wellesley and Co offer Children’s accounts, accepting funds from parents and guardians (money invested is not covered by the FSCS, but regulated by the FCA). These could prove to be a popular choice for investing the pensions in return for interest rates significantly higher than the banks, in order to support the younger generation.
A second study commissioned by protection specialist LV=, has also found that more and more of us are joining the ‘sandwich generation’. An ageing population and children having to live at home for longer means that many are having to fund family at both ends of the spectrum. This suggests that new retirees may also want to use their pension pot to support older relatives too.
Financial strains of supporting both generations are great, suggesting that investment options are a likely option for many in line with pension reforms.