Nearly 40% of retirees in the UK are financially supporting grown-up children, according to the Great Retirement report by the Wisdom Council in association with M&G. For most, this isn’t occasional pocket money — it’s day-to-day living costs, house deposits, wedding bills, and university fees. For a retiree drawing down a pension pot of £150,000, regular support of £300 a month eats into a pot that needs to last 20 or more years. That’s £3,600 a year that won’t compound or earn returns.
Disclosure: Some links on this page are affiliate links. If you make a purchase through them, Britwealth may earn a commission at no extra cost to you. We only include products and services that are relevant to the topic.
This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
Most retirees providing this help are in their 50s, 60s, and 70s — the very period when their own pension income needs to stretch furthest. The tension is obvious: the money you give your children today is money that won’t be there for your own care, health costs, or later-life needs. And nearly half of retirees (47%) say it’s very important or essential to be able to support family throughout their lives. That’s a powerful emotional pull, but it has a direct cost in pounds and pence.
The same research found that around three-quarters of retirees expect to leave an inheritance. But supporting adult children during retirement and leaving them something after you’re gone are often the same money, spent twice. Retirement regrets often stem from not spotting this tension early enough. Here’s what you actually need to know.
The central concept here is advancing inheritance — giving beneficiaries access to some of their inheritance while you’re still alive, rather than leaving everything in your estate. Done deliberately, it can reduce Inheritance Tax and let you see your children enjoy the money. Done without planning, it can drain the pension pot you need for your own later years.
What I tend to notice is that retirees who plan this deliberately — deciding in advance how much to give and from which account — feel far more in control than those who just say yes each time a request comes in.
The figures from the Great Retirement report paint a clear picture of where the money goes and how retirees think about it. But the numbers only matter if you translate them into your own situation.
→ Scroll right to see all columns
| Type of Support | Common Uses | Retirement Impact |
|---|---|---|
| Day-to-day living costs | Groceries, bills, rent, transport | Ongoing monthly outflow — hardest to budget for long-term |
| Major purchases | House deposits, wedding costs | Lump sum — depletes pot in one go, no recovery time |
| Education & university fees | Course fees, accommodation, materials | Time-limited but expensive — can be planned for |
| Advancing inheritance | Early gifts of cash or property | Reduces estate for IHT but reduces your own accessible savings |
| Care & medical costs | Care home fees, private treatment, equipment | Unpredictable — can spike suddenly and drain reserves |
The most striking figure is that 47% of retirees say it’s very important or essential to be able to support family throughout their lives. That’s nearly half of all retirees who view family support not as a nice extra but as a core part of their retirement purpose. The problem is that retirement income is finite. Every pound given to a child is a pound that won’t be available for a future care need, a home repair, or a longer-than-expected lifespan.
Consider a retiree with a £200,000 defined contribution pot who gives £400 a month toward an adult child’s rent. Over 10 years, that’s £48,000 — plus the investment growth that money would have earned if left in the market. At a 4% annual return, the real cost is closer to £60,000 in lost future value. That’s roughly three years of full State Pension gone.
For those thinking about how to structure retirement income before drawing down, the key is separating your own essential spending from the money you plan to give. If you treat family support as a discretionary expense that can be reduced or paused, you protect your core retirement income.
Where Retirees Slip Up When Supporting Adult Children
Treating pension withdrawals as free money
Taking money from a pension pot to help a child feels different from spending it on yourself. But the tax treatment is the same. If you’re under 75 and still within the tax-free lump sum allowance, the first 25% is tax-free — the rest is taxed as income. Withdrawing £10,000 to help with a house deposit could trigger a tax charge if it pushes you into a higher bracket. The Money Purchase Annual Allowance (MPAA) also kicks in once you start flexibly accessing your pension, limiting future contributions to £10,000 a year. That catches many retirees off guard.
Not communicating financial limits
The research shows that most support goes to day-to-day costs — the kind of ongoing payments that are easy to start and hard to stop. Without a clear conversation about limits, children can come to rely on regular help that the retiree can’t sustain. A one-off gift for a wedding is different from an open-ended monthly contribution to living expenses. The fix is simple: set a specific amount, a time frame, and review it annually. Write it down if it helps.
Ignoring the Nomination of Beneficiary form
Pensions are not normally covered by a Will. If you want your pension savings to go to your children — or to a specific child — you need to complete a Nomination of Beneficiary form (sometimes called an Expression of Wish) with your pension provider. Without it, the provider decides who gets the money, and it may not match your intentions. The form takes about 10 minutes. Check with your provider whether yours is up to date, especially if your circumstances have changed since you opened the policy.
Assuming inheritance will cover what you give now
Three-quarters of retirees expect to leave an inheritance. But many are drawing down the same money they plan to leave. If you give £500 a month for 15 years, that’s £90,000 that won’t be in your estate. The inheritance you expect to leave shrinks by exactly what you give — plus the growth it would have earned. If leaving a specific amount matters to you, ring-fence that money in a separate account or investment and don’t touch it for support.
How to Support Adult Children Without Jeopardising Your Retirement
Decide which pot pays for what
The cleanest approach is to separate your retirement income into three buckets: essential spending (food, housing, bills), discretionary spending (holidays, hobbies), and family support. Only draw from the discretionary bucket for gifts to children. If that bucket runs out, the support stops. This prevents you from ever having to choose between your own care and your child’s needs. If you’re using a drawdown pension, set a fixed monthly withdrawal for family support and treat it like a bill — not an optional extra.
Use tax-efficient gifting allowances
You can gift up to £3,000 per year free of Inheritance Tax under the annual exemption. Gifts of up to £250 per person per year are also exempt. Larger gifts are potentially exempt transfers — if you live seven years after making them, they fall outside your estate entirely. This is a structured way to advance inheritance without triggering tax charges. For couples, the allowances double. If you’re considering larger gifts, it’s worth speaking to a financial adviser about the implications for your own income.
Review your pension nomination and estate plan
With pension pots set to enter the inheritance tax regime from 2027, estate planning is becoming more complex. If your pension passes to a child after your death, they typically pay income tax on withdrawals at their marginal rate. Completing a Nomination of Beneficiary form ensures the right person inherits. For those with retirement housing or property assets to coordinate with pension savings, a full estate plan that covers both is essential.
Build a communication framework with your children
The research doesn’t cover this directly, but the pattern is clear: retirees who set expectations early avoid the hardest conversations later. Tell your children what you can afford, for how long, and under what conditions. If your support is time-limited — say, until they finish a qualification or reach a certain income level — say that upfront. If your own costs rise (care, health, inflation), the support reduces. Treat it as a family budget item, not a secret.
What’s changing in 2026 and 2027
From 2027, pension pots will be included in the inheritance tax regime, meaning unused pension savings could increase the IHT bill on your estate. This makes the decision to advance inheritance during your lifetime more attractive from a tax perspective — money given now may escape both IHT and the income tax that beneficiaries would pay on inherited pension withdrawals. The Pension Schemes Bill, expected to receive Royal Assent in 2026, will also affect how small pots are consolidated and how underperforming schemes are handled. If you have multiple old pensions, consolidating them before the rules change could simplify your estate planning.
Frequently Asked Questions
Does giving money to my children affect my State Pension? ▾
What happens to my pension if I die before my children inherit it? ▾
Can I give my child a house deposit from my pension without tax penalties? ▾
How much can I give my children each year without Inheritance Tax? ▾
What is the Money Purchase Annual Allowance and why does it matter? ▾
Should I update my Will or my pension nomination form? ▾
The Tension Between Helping Now and Leaving an Inheritance
The Great Retirement data shows that 76% of retirees expect to leave an inheritance, while nearly 40% are already drawing down money to support adult children. Those two numbers can’t both be true unless the support is planned, limited, and accounted for. The money you give today is the inheritance you don’t leave tomorrow — plus the growth it would have earned. That’s not a reason to stop helping. It’s a reason to decide, in advance, how much goes where and for how long. The retirees who manage this best are the ones who treat family support as a line item in their retirement budget, not an emotional reaction to each request.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read Retirement Fears: Confronting Anxiety and Building Confidence for the Future.
Sources and Further Reading
Retirement Regrets: The UK Mistakes You Absolutely Must Avoid — Practical look at the most common financial missteps retirees make and how to sidestep them.
Retirement Reboot: Second Careers and Entrepreneurial Opportunities for Over-50s — For retirees who want to rebuild income while supporting family, this covers the options.
Wisdom Council, in association with M&G (2024). Great Retirement report. 🔗
Wisdom Council, in association with M&G (2024). Great Retirement report. 🔗
London Daily (2026). UK’s 2026 Pension Agenda: Ten Key Developments Shaping Retirement Policy and Planning. 🔗
