At 56, I downsized and took £30k from my pension so my son could buy a house

So far, Sean Graham’s retirement hasn’t gone to plan. After a long career in business, and with a healthy £70,000 salary, he and his wife have downsized their large detached house in Chesterfield to a smaller new-build, sold one of their two cars, and made peace with the idea that their usual four holidays a year will be closer to zero. It’s a necessary sacrifice, he says, to see their 25-year-old son Joshua get his foot on the property ladder.

Just before his retirement in December, Mr Graham, 56, from Derby, took out £30,000 from his private pension to give to Joshua. The first £20,000 was a deposit for a house with his girlfriend, while another £10,000 paid for legal fees, furniture, and fixing up the home. He had hoped his son might be willing to dogsit in return. “But he doesn’t want pets in his new home,” he laughs.

Joshua is on a low wage as a shift worker in hospitality. He had always lived at home, until his dad offered to help him onto the property ladder. His father doesn’t worry that his son won’t be able to afford the mortgage, but he is continuing to plan for his son’s financial future. “We’ve made as many efficiency savings as possible, not only for our future, but just in case he comes knocking again,” he says. “The underlying question was not whether I could afford to retire comfortably. It was: can I still afford to be a safety net for him, which I’ve always been?”

Mr Graham joined the housing ladder in the 1980s, when he was just 20, buying his first home for £35,000. “I was part of the generation where you could buy a house for £30,000, and then the next minute, it was worth £100,000 for no reason.” His decision to give his son tens of thousands is extremely generous, but he is part of a growing number of middle-class parents who feel they have no option but to cash in on their investments or pension to support their adult children.

Graham’s best friend, a father of three adult children, doesn’t approve of the “Bank of Mum and Dad”, maintaining that his children should be financially independent. But Graham believes it’s his responsibility to support his son through otherwise out-of-reach milestones. Just last week, he bought Joshua his first car. “It’s a tough environment right now,” he says. “Young people are paying £2,000 to £3,000 just for car insurance, and wages aren’t keeping up with rising property prices. Honestly, I don’t know how kids are supposed to get by without help.”

Middle-class parents who are willing to give large financial gifts to their children have become an essential pillar of the economy. In 2019, Savills found that the Bank of Mum and Dad gifted or informally loaned a total of £5bn towards their child’s housing. In 2023, the Institute of Fiscal Studies (IFS) found that number has risen to £17bn, expanding their research to include not just first-time homes but also weddings and other markers of adulthood.

In the UK, the average cost of a wedding has more than doubled over the past decade, from £11,441 in 2012 to £24,109 in 2023. Most of these housing and wedding gifts come from parents aged over 50 to children in their late 20s and early 30s. A third of these young adults receive at least one substantial transfer (£500 or more) every eight years.

This year, estate agency Savills found that 52 per cent of first-time buyers received assistance from the Bank of Mum and Dad, with the average gift amounting to £55,000. And this number is set to rise, as young buyers can no longer rely on the government’s Help to Buy scheme, which supplied buyers of new-builds loans of up to 40 per cent of the value of the property?.

But what happens when even the wealthiest generations are unable to afford these gifts? As the cost of living crisis continues, and house prices rise, the Bank of Mum and Dad, it seems, is running low on funds. The latest Saltus Wealth Index reveals that 12 per cent of over 50s are supporting both adult children and ageing parents, while 12 per cent said they were dipping into or cutting back on pension contributions to fund this support. A total of 31 per cent said they were selling their stocks and shares investments, intended to fund their retirement.

This doesn’t come as a surprise to Carol*, who, a few years before her retirement, took £10,000 from her pension to help her daughter. All around her, friends were looking for ways to help their twentysomething children. “Some of my friends have remortgaged to help their children with a house deposit,” she says, while others have signed up to be co-owners of the house to increase the amount their child could borrow. Her daughter is now a homeowner, but as a result, she couldn’t take retirement at 60; she retired instead at 64.

Lesley Thomas, a money coach at The Money Confidence Academy and author of How to Talk to Your Teenager about Money, says the belief that Baby Boomers, who hold 56 per cent of the UK’s housing wealth, are the wealthiest generation is having a harmful impact. She increasingly sees her clients feeling pressured to offer gifts they can’t afford.

“As a parent, you can feel guilty a lot, and some of my clients have asked if they should remortgage their house because they feel so guilty about not helping their children,” she says. “It’s much more common than most people would first expect. I have been seeing an uptick in the past few years.” Thomas has also seen clients cash in a large chunk of their pension to support their children, despite this making retirement less secure.

This can easily lead to a build-up of resentment, as parents realise they have given more to their children than they could afford. “With one client in particular, a child saw financial support as their right, and when the parent could no longer provide any more financial support, that child reacted really badly, and the relationship with the parents broke down. I see that happening more and more.

“A lot of people are too embarrassed to talk about the money they’ve given their adult children. They probably feel the situation has snowballed because their children have not learned to stand on their own two feet,” she says.

Theresa*, 70, worries she may have given her adult children too much money. “Sometimes, when I see how they spend, I do wonder, did I make things too easy for them?” Theresa and her husband, 73, from Norfolk, gave their two adult children, 27 and 33, £100,000 each for a house deposit. “We wouldn’t have been able to do it if they had been closer in age,” she says. With six years between them, the financial blow was staggered, although Theresa was still forced to delay her retirement by five years to save for her second daughter, as well as cash in £10,000 from her private pension.

Giving her children this large amount of money has been one of Theresa’s proudest achievements, although it isn’t something she would boast about to her friends. The couple, both teachers, were able to save such large sums of money buying property and selling for a profit throughout the late 1970s and 1980s. “We are now mortgage-free, because in our thirties and forties, we used any extra income to increase our mortgage payments. The rest went into an ISA, or we put it into premium bonds. We were probably considered frugal by our friends because we didn’t spend on an expensive car or things like that. We just wanted to save our money for these much bigger, important things, like helping them buy a home.”

Her children, who are now both homeowners, have a different attitude to money. “They go on big holidays, and frequently eat out. They’d pay for a decorator to paint their house, things like that,” says Theresa. “We would never spend on that, and I worry that I haven’t set them up to understand the importance of saving.”

Mark*, 59, from Bishop Stortford, earns £200,000 a year, but even he is struggling to cover the cost of his adult children, 26 and 28. Last year, he and his wife, Sarah*, 57, helped both of them buy their first homes, giving a total of £52,000 for a deposit, and also went towards legal fees, moving expenses, and furniture. Purse strings only grew tighter when, in the same year, their eldest got engaged. Suddenly, they felt pressured to split the cost of the wedding. “We’ve always said we’d help the kids when the time came,” says Mark. “The problem was just that the time came for both kids at once.”

Mark is a senior partner at a consultancy firm, while Sarah is a teacher. They may have a high household income, but they currently pay £3000 a month for a care home for Sarah’s mother, 80. Mark has since reduced his pension contributions, and they have sold off some longer-term investments to pay for their children’s milestones. “We had budgeted for a few big trips now that the kids have flown the nest, including a long-planned trip to Australia, but helping with the wedding has taken priority,” he says. “We’re also conscious that if our youngest gets engaged, we’ll want to be able to do the same for them. We are bracing for more cost-cutting.”

Since they hit their fifties, the couple had hoped for an early retirement, but this is looking increasingly unlikely. “We’re in a fortunate position, and we’re glad we can help,” says Mark. “But we’ve had to adjust our expectations.”

The impact of these large gifts means that the UK’s wealth disparity is increasing. “While these transfers are important assistance for some, they are very unequally spread,” said Bee Boileau, a Research Economist at IFS. “The children of university-educated homeowning parents receive around six times more in wealth transfers during their 20s and early 30s than the children of renters, while white young adults are three times more likely to receive a substantial gift than Pakistani or Bangladeshi young adults.”

Thomas believes it’s unhelpful to gift children money, and instead, the Bank of Mum and Dad should be replaced by clear financial education. “If you are providing them with financial support, then they are not learning to be independent,” she says. “It’s important to be upfront right from the beginning, to lay out to a child what is possible, and what isn’t possible; what you will do as a parent to help them achieve and what they need to achieve themselves.”

Of course, it’s not always so simple. This year alone, house prices have already increased by another 5.4 per cent. Mr Graham felt he didn’t have a choice. And on reflection, he is happy to sacrifice his holidays for son Joshua. “I realised that when I finished work, I no longer craved the escape. It was the work I was running from,” he says.

The pair have also come to a compromise on the dog sitting: “He will do it. He will just come home and do it at ours instead.”

*Names have been changed