Families bail out friends and relations as inflation bites

Article date: 16 November 2011

  • Almost a third of families provide financial support for friends and relatives
  • Helping family and friends costs £442 or 2% of typical family income per year
  • Debt repayment, savings and pension contributions all suffer
  • Family "gifts" could add up to £71,000 pension pot over working life.

Almost a third (31%) of families are providing financial support to their extended family and friends, according to the latest Aviva Family Finances Report. Loans and gifts are given to ageing parents, adult children, siblings and close friends, with families paying out £442 a year on average.

In addition, 34% of families are providing practical support, such as child minding or help around the house, for individuals beyond their immediate family.

The most common recipients of financial assistance are mothers (10%), fathers (7%) grown up children who do not live at home (7%) and sisters (5%). Furthermore, 3% of people provide financial support for their close friends, as the notion of "family" extends beyond pure relatives.

Changes in financial circumstances (25%), meeting one-off expenses (21%) or dealing with living costs after unemployment (20%) were the top reasons for UK families providing financial help to family and friends. In addition, 19% said they were forced to help a family member due to their "poor financial management".

Families typically pay out £442 annually:
The typical amount of support provided by each family is £442 per year or 2% of the typical family annual income (£1,983), but some families contribute considerably more. Former partners (£1,447), adult children over-18 (£1,278) and children under-18 living outside the family home (£1,175) all receive an average of more than £1,000 of family financial support annually.

As people’s view of "family" widens, close friends are often included and they receive an average of £893 annually.  

While some families are in a position to help their friends and relations financially, others provide more practical support. Over a fifth (21%) help with cooking, cleaning or baby-sitting. 8% lend items so people don’t need to purchase them and 5% allow family or friends to live with them in order to save money.

Tough choices:
While many families would like to support their extended network of family and friends, this decision is not without sacrifices. One in seven (15%) families who provide support say they have made cut-backs in the last few years so they can continue to provide assistance, and 11% have been less able to support their extended families as they themselves are now struggling.

In addition, 10% have had to provide more support to their extended family and friends in recent years than they did previously. Divorced/separated/widowed families with children are most likely to have seen their families requesting further support.

Finances suffering:
The report also reveals how supporting one’s extended family can have an impact on people’s own future financial stability. Providing financial support to family and friends is cited as a barrier to saving (46%), repaying debts (24%), putting aside money for their children (14%) and paying into a pension (11%).

The typical annual inter-family and friend subsidy (£442) may not seem much, but over  a 40-year working life it would amount to £17,680 (excluding inflation and any interest) which equates to two thirds (66%) of the typical UK pension pot (£26,940*). In addition, if this amount was paid into a workplace scheme and matched by employer contributions, over a 40-year working life it could amount to £71,575** – a valuable nest egg.

Paul Goodwin, director of workplace savings, Aviva says: “In the current economic climate, families are clearly willing to support members of their extended network of family and friends. However, while it’s good to see how families are pulling together, people need to ensure that they are not sacrificing their own financial wellbeing, particularly in the long term.

“The stark truth is that people are not saving enough for retirement. However, by providing their families with £442 annually, over a working lifetime of 40 years they could effectively be giving away two thirds of the typical UK pension pot.

“Moreover, if people were to place this amount into a workplace pension which was matched by their employer, it could amount to more than £70,000 over 40 years. While we obviously don’t expect people to stop supporting their families, we would urge them to think about the types of support they can provide and decide whether they can help them in different, more practical ways.”

-ends- 

Download The Aviva Family Finances Report - Autumn 2011 (PDF 1.65MB)

If you are a journalist and would like further information on a specific family group or region, please contact:

Aviva press office:
Sarah Poulter
Telephone: 01904 452828 / 07800 691569 
Email: sarah.poulter@aviva.co.uk

The Wriglesworth Consultancy:
Lee Blackwell / Ben Marquand
Telephone: 020 7427 1400 
Email: aviva@wriglesworth.com

Notes to editors:

* Source: ABI Q2, 2011, average annuity pot size.

** This assumes a 25-year old male on a salary of £25,000 saves £442 per annum in a pension until age 65 (matched by employer) and takes no tax free cash at retirement. Source: www.aviva-pensioncalculator.co.uk.

Data was sourced from the Aviva Family Finances Report which used findings from over 8,000 people (minimum 2,000 per quarter) who are members of one of the six groups of families identified above via OpinionMatters.  All family heads are under 55 years of age.

This report is a definitive look at the personal finances of families in the UK. Not only does it look at personal wealth, income sources and expenditure patterns, but also tracks how these change across the different types of family unit.

In addition to regular data, each quarter a spotlight will be shone onto a different relevant topic with interfamily finance being the choice for November 2011. Additional data was sourced from Aviva and the ABI.

The Aviva Family Finances Report investigates the finances of the 84% of the UK population who live as part of a modern family. Based on customer profiles and Government data Aviva has recognised the six most common types of modern family as:

  • Living in a committed relationship with no plans to have children
  • Living in a committed relationship with plans to have children
  • Living in a committed relationship with one child
  • Living in a committed relationship with two or more children
  • Divorced/separated/widowed with one or more children
  • Single parent raising one or more children alone.

About Aviva:

Aviva is the world's sixth largest* insurance group. We provide 44.5 million customers with insurance, savings and investment products with total worldwide sales in 2010 of £47.1 billion**.                                                 

We are ranked as one of the UK's top 10 most valuable brands and Aviva plc are in the top 10% of socially responsible companies globally in the Dow Jones Sustainability World Index. In 2010 we invested £4.3 million into our communities in the UK, which included 1,500 Aviva volunteers giving 24,000 hours for good causes. In addition, our employees gave £600,000 through fundraising and donating.Read our corporate responsibility report at www.aviva.com/2010cr

Aviva is working in partnership with Railway Children through the Aviva Street to School programme to get children living or working on UK streets back into everyday life. Find out more at www.aviva.co.uk/street-to-school

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* based on gross worldwide premiums at 31 December 2010.
** at 31 December 2010.

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