One third of parents housing children using pension to help with finances

One third of parents who have adult children living with them are using their pension savings to help them cover the cost of housing their offspring.

Research by pensions advice specialist Portafina showed that parents are spending an average of £5,000 per year to keep their adult children living at home, with a third admitting that they have had to dip into their pension pots to afford the extra expense.

The adviser has warned that this practice could have a negative impact on their retirement savings.

Using an original pension pot of £50,000, with an estimated six per cent level of annual growth over 5 years, as an example, Portafina has calculated that a parent withdrawing £200 a month from a pension pot between the age of 55 and 60 could be left nearly £14,000 worse off.

Seventeen per cent of young adults polled for the study said that they expect to move out at some point after reaching 30 years of age, while and one in 20 parents admitted that their children may never move out, meaning that parents could find their finances affected for longer than they expected.

Apart from using pension savings to house adult children, the survey found that parents are also taking money from savings (28 per cent), altering their lifestyle (19 per cent), unable to downsize and enjoy retirement (13 per cent) and continuing to work for longer (11 per cent).

“If one in twenty parents can’t see that their children will ever be able to afford to move out, dipping into their own pocket to help out feels likes an obvious choice,” said Portafina managing director, Jamie Smith-Thompson.

“With parents choosing to sacrifice their pension pots to cover the additional costs created by adult children living at home, what happens when they reach retirement?

"If not thought through carefully, using their hard-earned money this way now could have a massive impact on their own quality of life further down the road.

“While it’s great to want to help financially, parents are clearly facing a fine balancing act between their innate need to support their children and their own need to fund a retirement that’s comfortable.

"With the scrapping of the Help to Buy ISA this November, I hope the government will look to launch a new incentive that benefits both parents and children alike.”

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