union for life

Government help for the Bank of Mum and Dad?

Government help for the Bank of Mum and Dad?

Man with calculator

If all the support that parents gave their children in getting on the property ladder was added together, the "Bank of Mum and Dad" (let's call it BoMaD) would be equivalent to the ninth biggest property lender in the country.

Research shows that a quarter of home owners received help with their purchase last year (including nearly two thirds of those under 35). This is expected to grow to more than 40% in the near future.

(These and other interesting facts available from a recent report from Legal and General.)

Many Prospect members of all ages will find themselves operating a branch of BoMaD or requiring its services. Having bailed out some of the biggest banks in the country during the financial crisis is there any government support left for BoMaD?

Actually, there may well be.

In April a new type of savings vehicle was launched - the Lifetime ISA. As you can tell from an earlier blog (and a recent letter to the FT), Prospect is not convinced that the introduction of the Lifetime ISA was a sensible policy but it is here now and it presents options that Prospect members should be aware of and may be able to take advantage of.

The Lifetime ISA is not a simple product and Prospect is currently working on detailed guidance for members, but at it's heart it offers a 25% government bonus on savings by those under 40 that go towards a deposit on a first home.

It isn't difficult to see how this might help the operations of your local branch of BoMaD. Instead of a loan or transfer from the branch managers to their offspring to invest directly in property - BoMaD could give up to £4,000 to put in a Lifetime ISA on their child's behalf and after a year the government will top that up by up to £1,000. By repeating this over a number of years the government subsidy to BoMaD's operations could be substantial.

I must emphasise that Prospect is not advising members to do this (or even thinks that this is sensible government policy for that matter). Prospect and its employees are not authorised or regulated to give financial advice. I am simply writing about this to highlight the development to Prospect members who can look into it themselves in case it is could be beneficial in their own personal circumstances.

We will shortly publish guidance on Lifetime ISAs for members and any member seeking to discuss these issues with a financial adviser can arrange to do that through Prospect.

Neil Walsh

Neil Walsh


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