Will you pay my mortgage? Bank of mum and dad withdrawals squeeze sandwich

Wealth managers on both sides of the Atlantic are reporting a surge in clients restructuring their retirement plans to bail out both elderly parents and adult children during the coronavirus pandemic.

Older workers helping their adult children who have lost jobs, or parents who require assistance affording retirement — or, in some cases, both — are getting squeezed while also trying to protect their own retirement plans.

“I can’t think of a client where this hasn’t been a part of the conversation,” said Adam Johnson, a wealth manager at St James’s Place in the UK. Although most clients planned to pass down wealth in the future, he said: “All of a sudden, someone’s flipped the switch.”

According to a new study by Edward Jones, a financial advisory firm, 24m Americans have provided financial support to their adult children since the start of the pandemic. Seventy-one per cent of retirees said they would risk jeopardising their own financial futures to offer financial support to their families.

“Clients have always worried about parent’s long-term care fees and helping kids with property deposits,” said Michael Martin, a client manager at UK wealth management firm Seven Investment Management. “What they’re talking about now is helping with rent or food bills or paying for everything because their kids have lost their jobs.”

The so-called sandwich generation — those with both dependent children as well as elderly parents who may require assistance — are the most likely to find their finances stretched.

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In the US, 47 per cent of those aged 40 to 50 have a living parent older than 65, as well as financially dependent children, according to research from the Pew Center, a US think-tank. One in seven provide financial support to both.

In the UK it is estimated that one-quarter of Britons have, or will at some point, carry the twin responsibility of supporting children and parents, according to a report by the Money Advice Service.

Parents of millennial children, who are “newly on the property ladder, with less equity and less tenure in their jobs” are the most likely to be affected, said Christine Ross, a client director at Handelsbanken Wealth Management in the UK. “There’s no question, parents have been stepping in to help.”

Advisers expect the trend to worsen as the pandemic progresses, especially in light of UK chancellor Rishi Sunak’s decision to wind down the furlough scheme. “When government support ends in the autumn, we will see the full scale of the job losses. That is when we will really see more parents step in,” said Ms Ross.

Helping adult children to pay the mortgage is the most common concern from clients, said Mr Johnson, as well as paying for tutors for grandchildren to help working parents get to grips with homeschooling. Wealthier clients may want to help their children with fees for private schools. “The furlough scheme protects you at a fraction of your outgoings, if your salary was previously much higher,” said Mr Johnson.

He said others were helping children in the middle of house purchases to complete. “They are trying to find ways to support their kids by carrying on those plans to move up the property ladder, which is now more difficult for families on furlough.”

But paying for a child’s mortgage will have an impact on many people’s ability to themselves retire. “A lot of those parents could well be in their last couple of years of working, and for some, it means they will have to keep working,” Ms Ross said.

At the other end of the age spectrum, the sandwich generation may also have to support parents with pension pots hit hard by the market downturn, who may no longer have adequate resources for retirement.

“Most of my clients have at least one parent they’re going to…