Retirees are increasingly choosing to pass on wealth during their lifetime as policy changes reshape their wealth transfer plans, new research from Quilter has shown.
The firm’s annual Retirement Lifestyle Report revealed the average retiree now gives £2,272 a year to relatives and spends a further £2,250 on education costs for children and grandchildren.
Family support now accounts for 17% of annual retiree spending, making it one of retirees’ largest outgoings, ahead of groceries.
Quilter said policy changes appear to be influencing behaviour, with almost two in five (39%) retirees saying the current political environment is affecting their inheritance tax planning. Among those impacted, just 5% say they are taking no action, significantly down from 38% last year.
Instead, a third (33%) are looking for more tax-efficient ways to save, 27% are considering moving abroad and the same number (27%) are also using trusts.
Just over a quarter (26%) are putting assets into relatives’ names and 26% are gifting more to family and friends.
The research also pointed to clear differences between advised and non-advised retirees. While 63% of those who have received advice say the current political environment is affecting their IHT planning, just 8% of those who have never sought advice say the same.
The planned inclusion of unused pension pots within estates for inheritance tax purposes from next April is also prompting people to rethink their retirement strategy. Almost three in 10 (29%) say they plan to spend more of their pension savings during their lifetime, while 26% intend to gift more of their pension wealth and 24% expect to access their pension earlier than originally planned.
The research also revealed that 57% of retirees withdrew tax-free cash ahead of the last Budget, including 42% who said they did so in anticipation of rule changes. More than three in five (62%) of those that withdrew tax-free cash regretted doing so.
Steven Levin, CEO of Quilter, said: “Our research shows retirement is increasingly becoming a balancing act between meeting your own needs and supporting the people who matter most to you. Many retirees are choosing to help children and grandchildren through significant life events. The scale of that support shows the important role retirees continue to play, not just in their own households, but across the wider economy.
“At the same time, many people are making these decisions against a backdrop of economic uncertainty and significant changes to the retirement landscape, leaving many concerned about their own financial future.”
Quilter said 60% of retirees are concerned about maintaining their current standard of living over the next year. For advisers, this presents an opportunity to help clients understand what they can sustainably afford to give away, how policy changes may affect their plans and how to balance supporting family with maintaining their own financial resilience, the firm said.
“To help support better outcomes, policymakers should focus on creating a more stable and predictable framework for retirement planning. Providing greater certainty around pension tax-free cash and the long-term future of pension tax incentives, should be a matter of priority.
“There is also a need for a sustainable long-term approach to the State Pension provision and for gifting rules to be updated to better reflect modern family life. Alongside greater access to advice and support, these changes would give people the confidence to plan for their own future and support the next generation,” Levin added.
