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Will the kids pay for your retirement?

With most of us saving far too little for our retirement, we risk ending up an expensive burden on our children. But will the next generation be in a position to help out? And will they want to?

Will the kids pay for your retirement?

My daughter sent me a jokey Mothers’ Day card which was uncomfortably near the bone. ‘Be nice to your children,’ it said, ‘because they are the ones who will be choosing your care home!’

Worryingly, this could turn out to be all too true. 

Although I have probably made sufficient financial provision for my retirement, that doesn’t take account of losing my marbles and my children choosing the most economical solution in order not to deplete their potential inheritance.

Short of dementia setting in I shall hopefully be OK. But a survey from Aviva highlights the fact that many parents will be dependent on their children for financial support in old age. In my case I helped support my elderly widowed mother in sheltered accommodation for around 15 years before she died. But as one of a large family, the cost was affordable spread between six of us.

Will children pay?

With most of us saving far too little for our own retirement, increasingly we are going to be a burden on our children. But will the next generation be in a position to help out? 

Most young people will graduate with huge debts which could take up to 15 years to pay off. Then they will be saving for their own home and pension and bringing up children. And there are not many families any more, like mine, with six children to bear the costs.

Unsurprisingly the research found that most children would rather support their own parents in retirement than pay more tax to increase the state pension which would benefit all pensioners. Some 44% of under-21s believe the system of paying for state pensions is unfair as young people today have to pay more and will have more debt, while 34% believe the system is unfair as today’s workers won't receive the same good deal when they come to retire.

Aviva found that one in three people claimed they would be prepared to sacrifice at least 10% of their income to support their parents in retirement. This is roughly double the amount that savers are currently investing in their company pension arrangements – on average 5% of gross salary.

Can they afford it?

But when it comes to it, will the findings of the research hold good once these children are nearing their own retirement and are still supporting elderly parents? 

While nearly two thirds of UK adults say they would be prepared to financially support parents and grandparents struggling to make ends meet, one in three are actually unable to do so, due to their own financial pressures.

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26 comments so far. Why not have your say?

Stanley Spencer

Apr 21, 2011 at 13:30

If kids contribute towards care fees then the parents will probably be regarded as self funders. As a consequence they will be charged at a higher rate, in effect, subsidising those being supported by social services. I think that the increase in tax on old people, via the payment of NI should help to reduce this problem. Afterall I still need to pay car insurance etc when I retire, why not National insurance? Any shortfall needs to be collected via inheritance tax. Any child whose parents pay inheritance tax will probably receive a significant sum from their parents' estate.


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Van Patten

Apr 21, 2011 at 14:55

I would hazard that, wishful thinking aside, very few people , even those earning £85,000 or more will be in a position to help both their children and their parents, short of adopting a John of the Cross style asceticism. House prices continue to rise, at least in the South East. Pension provision, especially in the private sector, is arguably a bomb that will make the explosion at Hiroshima seem like a mere murmur in a stream. Very few people, even those with some understanding of the stock market, will know when to cash in their investments, and equally few realised that defined contribution schemes can go down as wel as up. Public Sector pension reform is being blunted by well paid, underworked demonstrators who seem able to simply take time off to protest 'the cuts'. In short, I think we are looking at grannies being abandoned on hospital doorsteps in the not too distant future, possibly even compulsory euthanasia for those elderly not able to look after themselves....that's how bleak the situation is, and it is not getting any better.

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Apr 21, 2011 at 15:10

With the destructive policy of raising taxation mainly from labour instead of wealth, the supply of labour will decrease and the value of wealth will follow. High marginal tax rates will chase the young overseas, from where it is easier to ignore the poverty of their parents. Hopefully their parents will vote in a government that rewards work with low marginal tax rates and instead raises revenue from taxes on gains in asset prices.

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Lets Face It

Apr 21, 2011 at 15:59

The U.K still lives in dream land. There isn't much wealth creation going on anymore. Things have got to change, we can't support 70 million people on diddily squat.

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George Hill

Apr 21, 2011 at 17:28

Poor kids? Perhaps not... at least they WON'T be after I've gone.

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al young

Apr 21, 2011 at 19:13

They won't be kids then thoug will they George Tthey will be in their forties maybe fifties living in a bed sit they bought last year.

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George Hill

Apr 21, 2011 at 20:27

You dead right Al. However, tough economic climate or not both of the "kids" (in their thirties) have climbed WELL up the property ladder already. I didn't help them much monetarily. Too many "youngsters" moan about their lot but are not prepared to dig in, save the deposit and start off with a modest property. The situation isn't ALL that different to that which existed in 1970 when I started my first mortgage.

I guess my comment WAS a bit flippant but there are some cogent observations here from contributors on the general subject.

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al young

Apr 21, 2011 at 20:42

Thanks George. I was flippant as well. You're right to talk about taking personal responsibility. My kids are still small. I worry what the legacy the 2000-2007 has saddled them (and us) with.

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George Hill

Apr 21, 2011 at 22:09

Thanks for your reply. My "cure" for the bad situation the banks (mainly) got us into, is to "skip" my kids (they don't need it) but to make sure our two granddaughters (3 and 5) will be "bank-rolled" for a future when times WILL get rough.Good luck with your own family.

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charlie 12

Apr 22, 2011 at 09:03

"modest incomes between £35,000 and £45,000" - been spending too much time with bankers?

The situation will never improve until someone gets a grip of public sector pensions - why should 23% of my council tax go to provide thier pensions, when they provide me with a reduced service?

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steven fieldfare

Apr 22, 2011 at 12:05

Stanley Spencer touches on a major problem - the cliff edge between those who are provided with services regardless and means tested "self funders" - the benefits culture extended into old age.

Retired folk with assets are expected to continue funding non payers in care homes through their Council Tax in knowledge that should they require a care home themselves, they will have to sell up to fund their own care and that part of the charge will be used to cross fund Council sponsored residents.

Recently, I have been handed a booklet telling me that reform of day care will "empower" me (and elderly parent) with choice by providing by funding paid into a special account for the purpose. Catch 23 that funding will be means tested. Result is that those below the line will be funded with full service cost assessed as 53 pounds (a similar idiocy to providing tenants with rent money to pay landlords rather than paying landlords direct); while those required to "self fund" will have a present contributory charge of 5 pounds raised to 53 pounds, which they will have to find.

All the imperatives are for the elderly to hand inheritance early to children and leave the State to fund care needs rather than seek support from children. Until there is grass roots reform of means testing to a graduated income based system (including assessment of disposable income of the welfare reliant), the main burden for elderly care will continue to fall on the State.

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Gerald White

Apr 22, 2011 at 18:28

I find it difficult to relate the arguments in this article with the well publicised "Bank of Mum and Dad". Are those parents that are financing their children's accommodation in this way the same ones the children are supposedly going to look after as discussed in the article?

Bill W

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Stanley Spencer

Apr 23, 2011 at 08:25

In response to Gerald

I am aware of couples who were reasonably generous towards their children, paid 10% of their income to charity and generally lived a good life. They subsequently went into a nursing home which, as a couple, cost £70,000 per annum. This cleaned them out as far as savings and property were concerned. The children were "invited" to contribute'; as far as I understand the children politely declined! and who can blame them.


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David Lewis

Apr 23, 2011 at 17:19

I have told my children that under no circumstances must they make a contribution to my care. I am also trying to 'give with warm hands' now to reduce my estate and so that they get some benefit before the state steals the residue, ostensibly to 'pay for my care'.

Why do I feel like this? Because I have paid for my care in the form of contributions to the National Insurance Fund all my working life. Now I am approaching needing to claim I am being told that the Government has spent too much of my money paying benefits to immigrants and people too lazy to work. Well they knew from the day I was born when i would retire and that I would need funding, so, sod them - let them find the money or preferably let me die, if they were a private fund my children could then sue the directors for compensation.

Secondly the government has determined that I must be kept alive as long as possible, but not given the care or drugs to have a quality of life. Nobody has asked me and that is not what I want. My wish is to have an active life for as long as reasonably possible and then pop off quickly not be incarcerated in a prison for the demented. So why should I pay for my imprisonment as well?

I don't understand why all this effort is going into prolonging life when we can't afford for people to live longer. Why not give free beer, fags and happy meals to everybody over 65 and let us go quickly? Oh, I see because we would then have money to leave to our children so they could fund their retirement - well we don't want that do we?

So, lets stop all thisa nonsense about we cannot afford to fund care for the elderly. We, the aforementioned elderly have already funded it and you the ruling classes have stolen it for other causes. Well, it seems that the Court of Human Rights won't act for us - well there is a surprise it only acts for the rich. So i have to accept what you have done. But in no way do i want my family providing funds a second time to pay for me to be in care which people are comitting suicide to get out of. Just leave me there for the shortest possible time and let me die in peace please.

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Chris Kenney

Apr 24, 2011 at 09:48

Having worked in the Middle and Far East and seen how things are donein society I sugest we adopt the following measures.

1 Restore the extended family concept taking ordinary old age care off the

state .

2 Give a genuine return on capital saved or invested.

3 Encouarge our young people to get willing to do a proper days work,as

many of them can`t be bothered to turn up for it let alone do one.

4 Explain to the young that wearing your cap the wrong way round and talking

rapp at a interview dont get you the job.

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Anonymous 1 needed this 'off the record'

Apr 24, 2011 at 13:01

Until there is some limit on Government spending taxes will continue to rise and the wealth of the country stripped for consumption. The high rate of tax is detrimental to working people trying to save and invest in the future. Easier to not work, have nothing and let the Government provide.......

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George Hill

Apr 24, 2011 at 15:21

The country has ALREADY been stripped of its wealth. Check out the "fire sales" of the 1980's when our utilities (and more) were flogged off cheaply. Instead of the (extortionate) profits being made today BY these firms (now, sadly, all "non-UK") the profits SHOULD have been going towards modernising this country's infrastructure as well as returning a lot of money to the UK's coffers. Ah well, we had our chance...

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Apr 24, 2011 at 21:54

Are these youngsters that will be reluctant to fund my retirement the same ones that caused the devaluation of my savings and my payments into the NHS by living on credit and then not making any repayments to those providing that credit? Are they the same youngsters that attended University funded by my earlier contributions....etc. etc Roll on death!

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Apr 25, 2011 at 17:09

I love my daughters dearly, but the very last thing I would expect them to do is to foot the bill for my care home fees.

That is my responsibility.

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Stanley Spencer

Apr 25, 2011 at 17:51

The conundrum is who should pay for those who, for one reason, or another dont have sufficient funds for their Nursing home fees? Either those without have to be put onto the street, or are funded by their family or wider taxpayers.

Personally, I think that the retired should, collectively, be responsible for funding the care homes etc. not the younger taxpayers who have their own problems.. After all its our generation that has allowed this situation to develop. This could be managed by continued NI contributions into retirement and/or inheritance tax.


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steven fieldfare

Apr 25, 2011 at 20:45

To part address the conundrum posed by Stanley Spencer over how care homes could be funded, here goes:

everyone should make some contribution according to their income, through NI or other taxation. That should include a small contribution by those on welfare from benefits income (before respondents point out that welfare recipients are too impoverished to do so, I counter that many welfare recipients have higher disposable income than those in the income tier above as they are often free from high fixed overhead costs of housing and Council Tax).

when in need of care, recipients contribute from income (including investment and home rent but not capital) up to full cost.

care homes are increasingly provisioned as flatlets (around a core complex), which could be purchased leasehold and passed on at market value. As an incentive, the flatlets would be free from Council Tax and funded by occupants from home sales. Such a scheme would seem to have the advantage of funding purpose built care homes within affordable housing initiatives; and without overall loss from the affordable housing scheme, as an equivalent number of mainly family homes would be given up to the market. Flatlet occupants would therefore make substantial contribution to their care cost, using preserved capital, and have smaller residual charges.

a combination of increased long term contribution and reduced care cost would enable the resulting shortfall to be better afforded from general taxation, while allowing inheritors to benefit from the prudence and provision of forebears. It makes saving worthwhile.

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David Lewis

Apr 25, 2011 at 20:46

Stan, you just don't get it do you. The retired already have paid for their care, all their working lives they have been paying into the National insurance Fund which, inter alia, is to pay for our care whehn we are older. I will not pay agin, the Government are at fault for not doing their sums and putting the funds aside. Instead they have used my money to pay benefits to immigrants, assylum seekers, religious fundamentalists and ne'er do wells too lazy to work.

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p walton

Apr 26, 2011 at 05:42

If we didn't have immigrants the NHS and other services would collapse, and the health and wellbeing needs of old and young wouldn't be met. For this and a host of other reasons this xenophobic argument needs to be absolutely ignored by rational people.

I too would like to be able to choose to die a dignified death at the natural end of my life as the thought of having to have my backside wiped in old age fills me with fear and dread. A well controlled and regulated euthanasia scheme cannot be beyond constructing intelligently to suit individual needs and desires, and without such a scheme many will commit suicide at an earlier time than they would ideally allow themselves to be put to sleep in a dignified legal manner because of fear of loosing the capacity to do such themselves. We do this for dogs and other pets considered as loving members of a family without thought, but granny must go on no matter what. I AM NOT ADVOCATING ANY COMPULSION IN THIS...SIMPLY CHOICE! Religous arguments need to be depracated in importance to a status below personal choice in our secular society when any such scheme is argued.

Philip Walton

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David Lewis

Apr 26, 2011 at 16:58

I didn't think we paid benefits to imigrants who worked, in the NHS or elsewhere. To label the comment xenophobic is just to shout without thinking. Its is not xenophobic to state a fact, only if you put an interpretation on it based on prejudice. I have lots of friends who originate from other countries who work hard and pay their way.

The fact is that money paid by taxpayers in this country over their lifetime has been diverted by a Labour government for political means because they thought that welcoming more people who wouldn't work would increase the labour vote. So I am now having to pay for Blairs power needs.

We don't need euthenasia, just a proper approach to supporting the living and not keeping them alive but not giving them quality of life. Take the research away from Drug Companies and give it to Universtites on directed programmes so we attack the right targets not the ones that sell drugs and recognise that allowing people to die with dignity is a priority.

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Stanley Spencer

Apr 27, 2011 at 15:23

in response to Davis Lewis.

I think he is mistaken to think that the retired have spent their lives contributing to NI etc to pay for their old age. Those contributions were designed to care fot the previous generation. It worked quite well whilst people were retired for five or so years before death.

Nowadays there is a much longer expectancy. Governments can be blamed for not facing up to this! At the end of the blame game, however, there is still a shortfall which has to be funded.

I do agree that more should be spent on research into such things as mobility, incontinence, dementia etc. At the moment these are not considered as part of the NHS brief and, therefore, are given a low priority wrt research.

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David Lewis

Apr 27, 2011 at 16:50

I disagre with Stanley Spencer. The social contract was that you pay the NI and the government will look after you in ill health and old age. Of course there was a catch up to be made because previous generations had not all paind for care in the same way, but it the NHS were a private scheme the Actuaries would have looked at the Demographics and set contribution rates so that funds were available.

Howecver even if you are right and the deal was that we paid for the last generation and the next paid for us, why stop that at the point where I need to claim? It is the government that has decided that life expectancy should be increased, by all its pressure to eat and drink what they say and by handing out some drugs (Statins and Asprin for example) like they were sweeties. They can't have it both ways and I am fed up with being told I am the problem for living too long.

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