Every parent or grandparent has the opportunity of helping future generations of first time buyers to get on the housing ladder – by making sure their wealth “cascades down the generations.”   Before you read the AA press release, you might want to check out how you could help future generations of first time buyers in your family.

Despite the housing slump of the last three years, the long term home-owning aspirations of first time buyers are higher than at any time since the 1970s.

New research carried out for the AA Home Emergency Response service reveals that of those who have bought their first home in the period since the 2008 housing peak, 37% say they feel they can realistically aspire to owning a detached home¹.  The equivalent figure for those buying in the 1970s is 39%, falling to 33% for first time buyers in the 80s, and 32% for those entering the housing market in the 1990s.

Aspirations for the size of home have increased – while the percentage expecting to progress to a detached home with two to three bedrooms fell slightly from 13% in the 1980s to 12% for those buying since 2008, the proportion of first time buyers with expectations of a four or five bedroom house have risen from 19% to 22% over the same period.

The political debate about mansion taxes has not dissuaded people from thinking ownership of a very large home will be feasible for them – 3% of those buying their first home since 2008 expect to eventually own a home with six or more bedrooms, three times the proportion of those getting their first mortgage in the 1980s.

Both men and women are equally bullish in their belief that a detached home will be within their reach, but it’s the younger generation who are most likely to feel this will be at the larger end of the market.  7% of 18-24 year olds believe they will end up owning a detached home with six or more bedrooms.

The 1980s is remembered as the decade in which Margaret Thatcher’s Government heavily promoted the benefits of home ownership.   However, for a quarter (24%) of those buying in that decade, a terraced home was the limit of their home owning ambitions.  Only 15% of those buying for the first time since 2008 believe their ultimate home will be a terraced one.

While people’s aspirations have stretched beyond the terraces, over the same period the expectations for apartment living have almost doubled.  In the 1980s 6% of first time buyers believed that a flat would be the pinnacle of their home ownership, a figure which has risen to 11% for those buying in the post 2008 housing market slump.

Although 37% of first time buyers may feel they will achieve ownership of a detached home, detached properties only make up 17% of the housing stock, as seen in the table below:

² Figures for England only – bungalow category includes all bungalows

Tom Stringer, Head of AA Home Emergency Response, said: “On the motoring side we are aware that new drivers love their first car but often aspire to drive a bigger, better, more expensive model.

The same appears to be the case in the housing market.

“This research has revealed that the troubles in the housing market over the last three years have not dented the aspirations of recent first time buyers.  In fact, new entrants to the market are more positive about their long term prospects than those entering in the last thirty years – something which could bode well for recovery in the market. Just as car owners are likely to have breakdown cover for emergencies, we believe it is important for home owners to be adequately covered in the event of emergencies. ”

First time buyers how to help.

Why Protecting Assets is so important.

• 41% of over-55s claim to have helped their families and close friends out financially in the past 12 months.
• The typical amount provided was £1,430 (9% of their average annual income).
• 31% provided money specifically to help pay bills.

Aviva’s latest Real Retirement Report has discovered that the UK’s over-55s are choosing to spend a significant amount of their retirement income on supporting their loved ones financially. (Ed: so protecting assets becomes even more important.)

Just under half (41%) of the UK’s over-55s have provided financial assistance to their families and close friends in the last year. The typical amount provided totalling 9% of average annual income (£1,430).

Most likely to have received financial help were adult children (23%) and grandchildren (13%). People who are typically ‘retiring’ (aged 65-74) are the most likely to have helped their adult children in the last year (28%). Significantly, 20% of the long-term retired (over 75) have given financial assistance to their children in the last year.  This despite the fact they are most likely to be surviving on a fixed /limited income themselves.

The main reason for over-55s to provide financial help was to help pay off debts/bills (31%), followed by one-off costs (17%), or topping up income (17%).

Main reasons for providing financial assistance.

Source: Aviva Real Retirement Report.                                                                  

The UK’s over-55s are not just providing financial help to their children and grandchildren.  4% of over-55s said they had helped pay for care costs/support for their own ageing parents in addition to providing a financial top-up (2%) to their income. While a smaller percentage of over-55s have provided financial assistance to their parents, the average amount provided is higher, with pre-retirees (55-64) providing an average of £3,280 per year.

The cost implications.

The impact of providing this financial support for those moving towards retirement or on a fixed income is significant. 75% of those over-55s who had provided assistance said it had impacted on their financial planning. More than a third (37%) of over-55s said it has resulted in them dipping into their capital and they now have less in savings/investments than before  Almost a quarter (23%) found they had less to spend on day-to-day expenses.

Non-financial support.

It is not just direct financial support that over-55s have been providing though.  The Real Retirement Report found 46% of over-55s provided some form of non-financial help in the last year. Typical non-financial assistance included: helping out with transport needs (41%), providing general help around the home such as odd jobs (35%) and providing childcare (34%).

However, even non-financial support has a cost and 6% of over-55s said the provision of support (both financial and non-financial) had meant they had had to delay retiring. 4% that they had retired early to look after older family members.  2% re-entering the workplace part-time to generate/replace lost income.

Clive Bolton, ’at-retirement’ director at Aviva.

“Every age group has come under financial pressure as a result of the current economic situation. But the over-55s have their own unique pressures. Traditionally, this is when they are finalising their retirement plans or surviving on a fixed income. So unplanned costs and supporting others can have a significant impact on their future standard of living.

“As such, people need to plan for the unexpected when they are thinking about their retirement income. Life rarely goes as planned and so it is vital people budget for extra costs such as helping out their adult children or parents financially, or even what they will do if they or their partner are unable to work for as long as they had planned. Building up a contingency fund will mean they can protect valuable retirement capital as this will need to last them their lifetime.”

Our comment: it is crystal clear that parents need to look closely at protecting assets for the use of future generations as the passing on of capital becomes more difficult and the need for it rises, it is crucial not to waste family assets just through inaction.

Protecting Assets – have you? 

Asset Protection Seminars are running all around the UK.

Some of the presentations have run into severe trouble with the BBC attending some of the asset protection seminars to point out that their marketing techniques were so badly designed that they would cause the scheme to fail if challenged.

We don’t have the time to run seminars, nor do we employ sales people who will pressure anyone into taking up unsuitable plans – not that we are implying this organisation would do such a thing.  They were probably just naive. Which is a worry!  It is pretty universal knowledge in the profession. If you want to keep it in the family, don’t flaunt your “cunning plans”!

Asset Protection plans have many advantages but it really is not prudent to offer any sort of guarantee that they offer protection against Long Term Care Fees.   Such a guarantee is self defeating,  Why?

• It provides evidence of a deliberate attempt to avoid Long Term Care Fees.
• No one can guarantee that the law won’t change.
• It waves a red rag at the proverbial bull – the Local Authority.

There are so many other benefits to our Probate Protection Trust that it is worth having even without any potential Long Term Care savings.

Why not enquire now about our version of the Asset Protection Plan, the Probate Protection Plan. We’ll give you the facts and let you make up your own mind.  Advice and recommendations are there as and when you want them, because the Probate Protection Plan is not right for everyone.

Asset Protection Seminars are bound to be interesting – but don’t get carried away and sign up without a great deal of thought.

My parents house was transferred to me to me 10 years ago, in order to avoid losing it to care fees. They are both still alive and in fair health at 90 and 85 respectively, father and mother. I now need to use the equity in the property to raise some funds with their knowledge and agreement.

My question is if any of them were to go into a nursing home, they have no real savings to speak of, would the council authority take into account that they transferred the house to me to alleviate them paying for the care?

At present they are quite capable of looking after themselves with help from myself and family.  They live in Wales.

Parents House Problems I am afraid….

Hi Anon

The council can go back as far as they like to detect and rectify deliberate deprivation. It looks, by your own admission, pretty clear cut in this case!

So if there was no sound reason for the transfer of your parents house, other than avoiding Care Fees, they will attempt to claim back the full current value of your parents house from you, irrespective of any mortgage one it. Remember, local Councils have to pick up the tab for care fees if there are insufficient assets, and they are very short of cash.  Inevitably, they are going to become far more confrontational in pursuing ”hidden” assets.

A properly organised transfer (ideally into a trust such as ours) can be effective after 6 months or so, sometimes even less.

I have attached details for your information.

Do bear in mind that if you went bankrupt, your parents would be made homeless whether or not you take out this mortgage. If you get divorced, your wife would probably get half the value of your parents house, and wish to sell it!  If you died, Inheritance Tax would potentially have to be paid on the value of your parents house as it is part of your estate.

Good luck!

Steve
Stephen Pett 0800 298 5208 = 01323 741200
Allied Professional Will Writers Ltd

 Parents House