Financial Planning for the Bank of Mum and Dad

The Bank of Mum and Dad has become a cornerstone of the British economy, funding everything from education to first-time property purchases.

For successful professionals over 50, ensuring this "bank" remains solvent is a top priority. But with changing tax laws and rising care costs, careful financial planning is more important than ever.

Key Insights

💡 Financial planning is essential to protect your legacy and support your children’s financial future.

🏠 The Bank of Mum and Dad plays a pivotal role in funding education, property, and more.

📉 New inheritance tax rules and rising care costs could threaten your wealth if not managed properly.

💼 Working with a financial planner can help you navigate these challenges.

Planning for the Future

The Bank of Mum and Dad has long been one of the biggest financial institutions in the UK, funding everything from first homes to education and even wedding costs. But as government policies shift towards higher taxation and care costs rise, maintaining this financial lifeline requires careful planning.

If you're helping your children financially while also planning for retirement, wealth preservation is key. Here’s what you need to know to keep your family’s financial future secure.

The Bank of Mum and Dad: A Pillar of the Economy

Parents in the UK play a significant role in shaping their children's financial futures. According to YouGov surveys, parental contributions remain a primary funding source for first-time homebuyers. While economic challenges have slightly reduced the number of parents providing financial help, the trend remains strong.

However, with a government increasingly focused on taxing wealth and redistributing income, the long-term viability of parental financial support is under pressure. If you want to ensure your wealth benefits your loved ones without being eroded by taxes and rising costs, strategic wealth planning is essential.

Wealth Tends to Stay in the Family—If Managed Well

The Institute of Fiscal Studies has found that children of wealthy parents are eight times more likely to remain in the wealthiest income bracket than those from lower-income backgrounds. This is partly because affluent families have:

• Higher educational attainment leading to greater earning potential.

• Better financial habits, including saving and investing.

• Married partners with similar earnings, reinforcing financial stability.

If you want your children to benefit from generational wealth, a structured financial plan will help protect your assets and minimise tax liabilities.

Challenges to Maintaining Wealth: Two Major Risks

While wealth can be transferred across generations, it requires active management to prevent unnecessary losses. Two key financial threats stand out:

1. Inheritance Tax (IHT) and Pension Changes

From April 2027, pension assets above £325,000 will be subject to 40% inheritance tax unless passed to a spouse, civil partner, charity, or community amateur sports club. Additionally, if you pass away after age 75, beneficiaries could also face income tax liabilities on inherited pension funds.

How to Protect Your Legacy:

• Review your estate plan to minimise IHT exposure.

• Consider gifting strategies to pass wealth tax-efficiently.

• Explore trusts to control how wealth is distributed.

• Ensure your pension is structured correctly to avoid unnecessary tax burdens.

2. Rising Cost of Long-Term Care

Life expectancy is increasing, and so are care home costs, which now average £73,000 per year. If you require long-term care, your savings could be depleted quickly, leaving less inheritance for your children.

How to Plan for Care Costs:

• Consider long-term care insurance.

• Allocate funds to a care provision fund.

• Discuss care preferences with your family before it's needed.

Balancing Financial Support and Retirement Security

Many parents want to help their children financially, but it’s important not to compromise your own financial security in the process. The term SKIing (Spending the Kids’ Inheritance) has become more relevant, as retirees prioritise enjoying their wealth while they can. But how do you strike the right balance?

Smart Wealth Planning Strategies

• Use tax-efficient investment vehicles like ISAs and pensions to build long-term wealth.

• Set clear limits on financial support to avoid jeopardising your retirement savings.

• Diversify your investments to ensure capital growth and protection against inflation.

• Review your estate plan regularly to adapt to changing laws and personal circumstances.

Final Thoughts

The Bank of Mum and Dad remains a powerful force in wealth distribution, but it needs careful planning to remain solvent for future generations. With rising taxes, increasing care costs, and evolving financial regulations, taking a proactive approach to wealth management is essential.

At Strategic Wealth Partners, we help successful professionals like you protect your wealth, minimise tax liabilities, and ensure financial security for you and your family.

If you're concerned about inheritance tax, long-term care planning, or optimising your investments, get in touch today. A well-structured financial plan will help you secure the future for both yourself and the next generation.

Your wealth should work for you—today and for generations to come.

For a more detailed discussion on this topic, please feel free to contact us. Our team are always available to answer your questions and to help you with any of your financial planning needs. Here’s what we offer: A cup of coffee… and a second opinion.

Client Stories

"The trust and feeling of comfort has grown over the eight years since our first meeting."

"They are good listeners and make thoughtful recommendations that are relevant to what we are trying to accomplish in our lives."

"Working with them on my long-term financial plan has been a source of comfort since my husband's passing."

Our job is to make sure that every decision you make moves you closer to your goals.

Are You Ready to Retire?

Take our retirement readiness quiz to learn whether you're on-track to plan for your ideal retirement.

Contact Us

If you've never worked with a financial planner before, we'll guide you through the process.

If you have previously worked with a financial planner but believe it is time for a change, we can assist you in making that transition.