Parents look to bank of "son and daughter" to finance old age

14/03/07

Many parents admit they have so little saved for their old age that they may have to rely on their children for financial support during retirement, new research has found.

The survey by Clydesdale Bank ISA's and Investments has found one in four (27%) parents are hoping their children may be able to help them out financially - if necessary - when they retire.

With the deadline for making the most of your tax-free savings allowance for 2007 fast approaching (April 5), just one in six of us (17%) is investing a sum of money each month into a retirement fund.  Nearly four out of ten (36%) admit they have no real savings for old age.

Six out of ten non-savers (60%) acknowledge they should be saving for retirement but simply cannot afford to due to all the costs involved in modern life.

Steve Reid, Clydesdale Bank's Director of Retail Banking, said: "By not saving for the future, parents appear aware they're storing up hardship for themselves.  Many are already presuming their children - 'The Bank of Son and Daughter' - might be the answer to all their financial problems.  However, the easiest solution is to start saving now.

"Financial advisers would recommend people reaching their 30s should start investing at least 10% of their salary into a retirement fund so they can maintain a comfortable standard of living in later life and avoid the need to badger their children for money.  By putting this money into a tax-free savings vehicle such as a cash ISA or stocks and shares ISA, you can avoid being taxed twice on your hard earned cash."

Is this the future for non-savers?

Those without savings to count on in old age say retirement is not something they will be able to do at 65.

One in three (36%) think they will be working well into their 70s before they can afford to retire and a further four out of ten (43%) admit they will have to rely solely on a state pension.

Faced with the prospect of having little or no money to fall back on, more than half (52%) think they will have to make cutbacks when they retire and one in three (34%) fear the day when they give up work for good.

Steve Reid said: "For people who are looking to start saving for the future, however little they can afford to put away each month, ISA's are a great option.  It can be a real struggle to think about the long-term when the here and now is taking up your funds.  At least with an ISA your savings will grow more quickly, as they are tax-free.

"The deadline for people to make the most of their tax-free savings allowance is fast approaching, which is why we are urging anyone who has not sorted out an ISA this year to do so quickly."

Radical solutions

One in ten people (9%) say the only hope they have for funding their retirement is to inherit some money.

However, not everyone is pinning their hopes on such drastic measures.  One in six (16%) 55-64 year olds are looking to downsize their home to release necessary funds.

Just one in five (21%) of current non-savers are intending on opening up a savings account for retirement in the near future.

Women have the greatest fears

Clydesdale Bank research also found that, when it comes to investing for later life, women have the greatest fears with 38% thinking they will struggle financially when they retire.

One in three (34%) women say men have an unfair advantage when saving for retirement as they usually earn more and do not normally have to take time off work to raise the children.  More than one in eight (13%) women are hoping that their partner will help support them financially during retirement - compared to just 3% of men.

Do as I say …not as I do!

Parents are keen that their children do learn to save, though.  More than half of them (54%) will actively encourage their children to get into the saving habit so that they do not experience similar problems when they are older.

In fact, nearly two out of three (63%) parents think their children should be taught the benefits of saving for old age whilst still at school.