Have you been contemplating helping out a younger member of your family? Then you’re not alone. New research from the Institute for Fiscal Studies (IFS) shows that £17 billion is gifted or loaned informally each year, almost all from parents to their adult children – mostly to help with buying a house or at the point of marriage.

Most transfers come from parents aged over 50 to children in their late 20s and early 30s. Around 30% of young adults receive at least one substantial transfer (of £500 or more) over any eight-year period.

The children of university-educated homeowning parents receive around six times more in wealth transfers during their 20s and early 30s than the children of renters. White young adults are three times more likely to receive a substantial gift than Pakistani or Bangladeshi young adults.

Transfers are strongly connected to home purchase and marriage, but less to adverse events in the lives of receivers.

• Half of the value of gifts received is reported as used for property purchase or improvement. Those using transfers for this purpose received over £20,000, on average.
• People are also particularly likely to receive a large gift when they get married, but are not more likely to receive transfers when facing adverse events such as losing their job.
• Those in the least-wealthy third are relatively more likely to report using gifts for the purchase of a new car, to pay off debts or for educational expenses.

Other key findings from the IFS research, which was funded by the IFS Retirement Savings Consortium and the Economic and Social Research Council include:

• Over an eight-year period in early adulthood, those in the highest-income fifth of young adults are over three times more likely to receive a transfer than those in the lowest-income fifth. The amounts received by the highest-income fifth are 26 times bigger than those received by the lowest-income fifth.
• The highest-income fifth receive an average of £6,300, or 3% of their income over the same period, while the lowest-income fifth receive an average of £240, or 0.5% of their income over the same period.

Bee Boileau, a Research Economist and author of the report, said: “Substantial intergenerational transfers happen when people – particularly those with richer parents – are in early adulthood and are buying their first home or getting married. While these transfers are important assistance for some, they are very unequally spread. As well as the benefits these transfers can provide, policymakers should therefore keep in mind these transfers’ potential to pass on inequalities from one generation to the next.”

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