The reasons behind the reduction in gift-giving among 10% of retirees

Despite fears that inheritance tax changes may be included in the Autumn Budget, over 10% of retirees intend to reduce the amount of gifts they give to their children and grandchildren

As financial pressures increase, more retirees intend to reduce the amount of gifts they give to their children and grandchildren.

According to wealth manager Quilter, the average retiree currently spends roughly £2,500 a year on child support, £1,323 in gifts, and £1,175 on education.

Many, however, give away much more. For instance, younger, wealthier retirees give an average of 4,836 to family members and an additional 5,280 for education annually.

13 percent of retirees who participated in a Quilter survey of over 5,000 said they intended to cut back on gifts; this number rose to 16 percent among younger retirees with higher-than-average incomes and 15 percent among their peers with lower incomes. This implies that people who are financially secure are also making cuts.

According to Shaun Moore, a tax and financial planning specialist at Quilter, "Retirees offer a crucial source of financial support for younger generations, helping with everything from education to deposits for first homes."

"The whole economy, the housing market, and the educational system may be impacted if the Bank of Mum and Dad, or even the Bank of Gran and Grandad, starts to close.

People do want to be able to leave money to loved ones when they retire, according to separate research by BRI Wealth Management.

Just 31% of pre-retirees gave passing on wealth a top three concern in 2023; by 2025, that number had risen to 52%, making it the top priority.

Even though some retirees today are having to make financial sacrifices, the emphasis on giving comes as there are rumors that inheritance tax reforms may be included in the Autumn Budget, which is scheduled for November 26.

There have been rumors for the past month that chancellor Rachel Reeves may impose a lifetime gifting cap to restrict the amount of money that can be transferred before death without incurring inheritance tax (IHT).

The seven-year rule, which applies to gifts given away during your lifetime and has a taper rate of inheritance tax, is another possible target. Perhaps the duration could be extended past seven years.

Could the budget include changes to the inheritance tax gifting rules?

Tax increases in the next budget are the subject of numerous rumors.

Moore says: "As the chancellor's upcoming budget draws closer, the rumour mill is already in full swing. To date, there has been discussion about a possible lifetime gift cap, an extension of the time that donors must live after making a gift before it becomes outside of their estate for IHT purposes, and the possibility of another freeze on the nil-rate band.

"The government will undoubtedly be attempting to patch a financial gap, even though none have been confirmed.

In last year's Autumn Budget, the government announced changes to IHT, including a crackdown on farms, AIM shares, and pensions. Therefore, it is a topic that a government that wants to raise money could revisit without violating its red lines of vowing to not impose national insurance, VAT, or income tax.

There is a "medium" chance that the November Budget will alter IHT, according to Jon Hickman, a tax partner at the accounting firm BDO.

According to him, "modifications to the gift reliefs and rules alone would not raise enormous amounts, but when combined with the changes to IHT business and agricultural reliefs that are scheduled to take effect in April 2026 and pension funds in April 2027, the cumulative impact could produce a significant increase in future IHT revenues over time."

Although most taxpayers would not be impacted by such changes, and they would not violate any manifesto pledges, the government could be at risk from a crackdown because IHT policy has recently become a political football due to extensive media coverage.

Given that the annual gifting allowance has been stagnant for over 40 years and perhaps ought to be raised rather than decreased, it would be a courageous move on the part of the government to reduce it.

According to Quilter, the 3,000 limit would now be at 12,000 if it had remained constant with inflation.

The wealth manager is requesting that the annual gifting allowance be modernized by the government in order to lower inheritance tax obligations.

"The gift allowance is a holdover from a previous economic period. To better reflect contemporary financial realities, ensure alignment with current savings vehicles like the junior ISA, and enable families to support one another more freely and purposefully, Moore says even a small increase to 9,000 would be beneficial.