UK retirees now spend more on family than on food
Key Points
- Average UK retiree gives £4,522 a year to relatives and grandchildren's education
- Family support now beats groceries and makes up 17% of retiree spending
- 39% say the political environment is changing their inheritance tax planning
- 62% of retirees who took tax-free cash before the last Budget regret it
- 60% worry about maintaining their standard of living over the next year
The average UK retiree now gives £4,522 a year to relatives and towards grandchildren’s education, more than the £2,110 they spend on groceries, according to wealth manager Quilter.
Quilter published the figures on Thursday (17 September) in its second annual Retirement Lifestyle Report, based on a survey of 5,002 UK retirees analysed by the Centre for Economics and Business Research.
Retirees hand £2,272 a year directly to relatives and spend a further £2,250 on education costs for children and grandchildren. Together, family support now accounts for 17% of annual retiree spending, or one in every six pounds.
Holidays remain the largest single annual expense at £2,973, followed by home improvements at £2,776. Gifting and education support both now rank ahead of the grocery bill.
The average retiree spends £27,159 a year, which is £5,000 more than last year and adds up to around £368.7 billion across the UK’s retired population. Gifting, education support, charitable giving, holidays and home improvements account for 94% of that annual increase.
Average retirement income rose by just 1.2% over the same period, well below inflation. Six in ten retirees said they are worried about maintaining their current standard of living over the next year.
Tax rules are driving the gifting
Almost two in five retirees (39%) said the current political environment is affecting how they plan for inheritance tax. Only 5% of those affected are taking no action, down from 38% a year ago.
Among the rest, 33% are looking for more tax-efficient ways to save, 27% are considering moving abroad and 27% are using trusts. A further 26% are putting assets into relatives’ names and 26% are gifting more to family and friends.
From April 2027, any pension savings left unspent at death will count as part of a person’s estate for inheritance tax purposes. In response, 29% of retirees plan to spend more of their pension during their lifetime, 26% intend to gift more of it and 24% expect to start drawing on it earlier than planned.
The report also found 57% of retirees withdrew their tax-free pension cash ahead of the last Budget, with 42% saying they did so because they expected the rules to change. Retirees can usually take up to a quarter of their pension pot without paying tax on it, and 62% of those who withdrew early said they regretted the decision.
“Our research shows retirees are increasingly thinking beyond their own needs and planning for the people who matter most to them,” said Steven Levin, CEO of Quilter.
“Decisions around gifting, drawing on pension savings and passing on wealth can have consequences that last for decades, making it vital that people have the confidence to plan for the long term rather than react to short-term uncertainty,” he added.
Levin called on the government to provide greater certainty around pension tax-free cash and the long-term future of pension tax incentives, and to update gifting rules to reflect modern family life.
