Looking after loved ones during retirement
If you were born between the mid 1940s and the early 1960s you’re a fully paid-up Baby Boomer. However, in recent years you could also find yourself to be a member of a new group: the Sandwich Generation.
The Sandwich Generation are approaching or even in retirement themselves. However, unlike previous generations, they’re providing home care for ageing parents while still providing financial assistance for grown-up children. All this at a time when they should be enjoying the fruits of their own retirement.
If this sounds like you, the good news is that you’re not alone. We’re here with information and guidance to help you steer your way through it all.
Caring for elderly parents
As life expectancy has increased in recent years, so has the number of people who find themselves caring for elderly parents in their own retirement.
This can range from simply helping them to claim their state pension and benefits and applying for care home funding from local authorities to helping them with downsizing or equity release to pay for their care, or caring for them in your own home.
We’ve put together some simple, straightforward information on funding long-term care which will help you find your way through what can otherwise be a stressful and complicated time.
Two in five Britons are financially supporting their parents in later life[i]
What other help is available?
If you’re still working, your employer may be able to help with tax-efficient childcare vouchers. With this government scheme, for every 80p you pay into an online account to cover the cost of childcare with a registered provider, the government will top it up with an extra 20p. Employers may also be able to allow you time off work to make it easier to look after your elderly parent or relative. Many will offer flexible working arrangements.
Support is also available from your local authority who will be able to advise you on claiming benefits like Attendance Allowance.
Don’t forget about sharing the responsibility with siblings. Organisations like the Alzheimer’s Society can also provide a range of advice and support on financial issues, such as applying for a Lasting Power of Attorney.
A Lasting Power of Attorney (which replaced Enduring Power of Attorney in 2017) is something you can arrange with your loved one to allow you to make decisions about their property and financial affairs or health when they are no longer able to do it themselves.
Financially supporting adult children
Times have changed and adult children are now increasingly finding it difficult to save deposits for their first home, or need other forms of assistance. Plenty are living at the family home longer and needing more financial help from parents and grandparents.
Gifting money to your children or grandchildren
You may be considering gifting some of your money to your children to help them out. This can also be a tax-efficient way to reduce the value of your estate for inheritance tax purposes.
It’s wise to get some financial advice when you’re planning your estate, as you need to also make sure you won’t run out of money for your own retirement.
Freeing up the equity in a home
There are several ways to free up money from your home or your pension to give to your children while you’re still alive:
Buying an annuity with your pension pot to provide a guaranteed income – there are two ways to ensure your dependants can continue to receive the payments if you pass on:
- Guarantee period - This protects your annuity for a specific number of years so that your income will still be paid even if you pass on. This will provide a slightly lower level of income, but guarantee that your dependants continue to receive the income.
- Joint life annuity - If you die, it will pay an income to your spouse, civil partner, or chosen beneficiary for the rest of their life after you pass on.
Downsizing by selling your home and moving into something smaller to free up some of your equity to give to your children.
By taking out a lifetime mortgage which means you sell all or part of your home at less than the market value, and live there rent free with a guaranteed lifetime income.
More young adults are living with their parents
The number of 18 to 30 year-olds living with their parents has increased by 6 per cent in the last 10 years[ii]
In 2020, the basic cost of raising a child to 18 (including housing and childcare costs) now comes in at more than £152,747 for couples, or more than £185,413 for lone parents[iii]
How can I make sure I’m making an informed decision?
It’s not easy being part of the Sandwich Generation with two different sets of loved ones relying on you. So it’s important to look after your own health and mental well-being, as well as your financial health, so that you can continue to help them.
It’s tempting to give them as much as, or even more than you can afford. However, don’t forget you may need your own retirement funds to last for up to 30 years or more. You may even need to pay for care for yourself at some point.
Talking to an Independent Financial Adviser about your options will give you some new ideas, and some more tailored advice to suit your particular circumstances. Here’s a few tips to help you cope with the ‘sandwich effect’:
- Know what you’re dealing with - Take time to get your family members’ finances out in the open so that you can see clearly what you’re dealing with. All too often there’s either embarrassment or secrecy, and costs or financial commitments get hidden. The secret to coping is transparency. You may wish to consider putting a Lasting Power of Attorney (LPA) in place in readiness so that you are empowered to make the right decisions. A solicitor will be able to advise you about how to do this.
- Be prepared to pay a little for good advice - Estate planning, helping elderly loved ones with their finances and doing your own retirement planning can be complicated and confusing. Paying a little for some sound independent financial advice will clarify things for you, put your mind at rest and could save you money in the long run. Just be sure to check your adviser is registered and regulated by the Financial Conduct Authority.
- Power up your savings, investments and pension - When you’re in your 40s and 50s, the decades just prior to retirement, these are often the years where your earnings are at their highest. Think ahead and consider putting some extra funds into your pension or your other investments while you’re still earning.
That’s our potted guide for members of the Sandwich Generation. Now why not make sure you’re clued up on the little-known, but important Pension Lifetime Allowance.
The information on this page was sourced between June - October 2020 and updated in April 2021. Information on this site does not constitute any form of advice, representation, or arrangement by us and you take full responsibility for making (or refraining from making) any specific investment or other decisions. You should take independent financial advice from an adviser who is registered by the Financial Conduct Authority.