‘Bank of mum and dad’ under threat over social care funding fears

• Looming uncertainty over social care costs forcing older generations to delay passing on wealth
• A quarter of over-55s will hold on to all their wealth until they pass away as they grapple with uncertainty over future care bills
• Younger generations could find access to the ‘bank of mum and dad’ is cut off, leaving them struggling to get on the housing ladder, or pay university fees

A quarter of (24%) over-55s are not planning to pass on any wealth in their lifetime over fears they could face crippling care costs in old age, research for Zurich shows.
This means that an estimated 4.8million* parents and grandparents will delay passing on wealth until after their death because of growing uncertainty over the future cost of care.  

 

The findings reveal how a lack of clarity on social care funding is hindering the movement of wealth down generations.

Experts warn that the later transfer of wealth could hit younger generations the hardest, many of who depend on financial support from relatives to get on the housing ladder or pay university fees.

Under current rules, people can gift unlimited sums – known as ‘potentially exempt transfers’ - which are free of inheritance tax if the individual making the gift survives by seven years.  Individuals can also pass on wealth using a £3,000 annual gift exemption. But Zurich said the early transfer of wealth could decline as worries over social care take hold.  

Alistair Wilson, Zurich’s Head of Retail Platform Strategy, said, “Baby boomers are growing more cautious about passing on wealth in their lifetime in case they are hit by huge care bills in old age.  As older generations hold onto their wealth for longer, younger people could find access to the ‘bank of mum and dad’ is increasingly restricted, or cut off altogether.  For many young people, this could mean the dream of buying a first home or going to university slips further out of reach.  The government needs to end the uncertainty over social care funding so that savers can make plans for their financial futures, without fear of being blindsided by crippling care costs.”  

Overall, nearly two thirds (59%) of over-55s will not pass on any of their wealth while they are still alive.  As well as a quarter citing fears over social care, a fifth (16%) said worries of running out of money in retirement prevented them from passing on their wealth, while a third (32%) said they would like to spend their savings and pass on what is left.  

Fewer than quarter of (22%) of over-55s have already, or intend, to contribute to a house deposit for a family member, while an equivalent figure (23%) have or intend to pay towards a relative’s university fees.  

Wilson said parents who save small sums early on in their child’s life could build up a nest egg they can pass on, without jeopardising their own retirement or ability to pay for care. 

He added, “Making small, regular contributions to a junior ISA is a good way to build up a nest egg for your child by the time they turn 18. These accounts keep savings out of the taxman’s reach, where they can grow tax efficiently until adulthood, and beyond.  Investing just £50* a month into a junior ISA from birth could grow into a pot of £14,800 by your child’s 18th birthday.” 

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Notes to Editors

• *ONS population stats show there are an estimated 20,132,486 people aged-55 and over in the UK @24% = 4,831,796
• **Based on £50 invested every month for 18 years, assuming a balanced investment portfolio and ongoing charges of 1.75%.
• All figures, unless otherwise stated, are from YouGov Plc.  Total sample size was 2012 adults. Fieldwork was undertaken between 8th - 9th May 2019.  The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).