COVID prompts uplift in grandparental support

Most grandparents are acutely aware of the challenges their grandchildren face as they progress through education and into the workplace. University tuition fees and other costs can leave the upcoming generations with debts before they begin full-time work, making it more difficult for them to accumulate the deposit on their first property purchase.

The impact of the pandemic has added a new dimension to the problem, with disrupted education and a battered economy raising questions about future earnings potential. This has not gone unnoticed by those grandparents fortunate enough to be able to help the next-generation-but-one along the rocky road to their lifetime dreams and ambitions. Many have been moved to upgrade their help.

Evidence that grandchildren have often benefited financially from locked-down grandparents, unable to spend on holidays and eating out, has been provided through research conducted by a leading financial mutual. Scottish Friendly Assurance Society surveyed a sample of grandparents who were already investing for their grandchildren, to see what influence the pandemic had exerted.

Almost half upgrade their largesse

Responses showed that 47% of those grandparents had enhanced the amounts contributed to their grandchildren’s savings during the previous 12 months. The main drivers were found to be a reduction in their own spending opportunities during the COVID-19 restrictions and a heightened desire to create a larger savings buffer for their grandchildren at a time of economic uncertainty.

“There are grandparents who do have the discretionary income to put towards family savings and this can be a big support,” comments Jill Mackay of Scottish Friendly. “It’s also encouraging to see grandparents deciding to invest more of their money rather than save it in cash.”

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National Insurance and dividend tax rises

A new health and social care tax will be introduced across the UK from April 2022. The tax will initially begin as a 1.25 percentage point increase in National Insurance, paid by both workers and employers. From April 2023, it will become a separate tax on earned income, calculated in the same way as National Insurance and ring-fenced as a health and social care levy. Tax on share dividends is also scheduled to increase by 1.25 percentage points.