A recent press release from Lifetime Mortgage provider LV= has revealed the extent to which grandchildren are given financial support by their grandparents. Apparently nearly nine out of ten grannies and grandads have given cash and/or loans to their grandchildren since 2012.
The cash contribution from grandparents has alleviated pressures on the Bank of Mum & Dad who are often financially stretched themselves. Most grandparents have also indicated an intention to give additional funds in the future if the grandchildren require it for financing typically tuition & school fees, cars, holidays and helping with the purchase of the first home.
Grandparents will soon be given another option for raising the money earmarked for their grandchildren. Whilst in the past they have often dipped into savings, the removal of the obligation to purchase an annuity offers the potential for using pension pots as a method of passing money down to the younger generation. In this way, a gift can be enjoyed during the lifetime of the donor albeit that income tax must be paid on any amounts withdrawn.
Equity Release has also become a popular method of raising money for children and grandchildren by those aged 55+. Lifetime Mortgages and Home Reversion plans can be used to release cash in a manner in which no capital or interest payments are required. The gift of money in this way does not deplete savings or the income of the grandparents. Furthermore, there are no adverse income tax implications. In recent years, family support has become one of the main reasons that people are entering into Equity Release plans.
Selecting the most suitable Lifetime Mortgage or Home Reversion plan for grandparents is an important decision. Being independent, Bower offer impartial advice, a free consultation with a friendly and experienced adviser at which, if appropriate, other family members are welcome to attend.