The Sandwich Generation

The Sandwich Generation

Have you heard of the phrase “the Sandwich Generation”? These are adults who have both dependent children and parents who are also in need of some care; often all requiring a significant part of the family finances to keep everything ticking over. Historically, most people with pensions in addition to the State Pension put most money into their pension between the ages of 50 and retirement. Therefore, these competing demands can make financial life a very complex balancing act!

As the population ages, there will be more family groups joining the Sandwich Generation and financial planning will need to be inter-generational or it will fail to be fit for purpose.

The two big financial hurdles for young adults, (after finding a job), are likely to be getting on the property ladder and minimizing or paying off student debt. A basic university education is likely to cost significantly more than £27,000, (just 3 years of tuition fees), with living expenses on top, without worrying about more expensive, longer courses like medicine or architecture. A deposit for a modest flat in London could easily be a similar figure, so doting parents could be looking to find £50,000 from their own resources at an inopportune moment.

Turning to the senior generation, it can get infinitely more complicated; it is not unknown for middle-aged children to find themselves funding care home fees for infirm parents for an indeterminate time and at increasing expense, with little on no access to resources from the State or the parents in care.

Let me illustrate this with an extreme, but entirely plausible scenario, involving three generations.

Jon and Sue are both 52 years old and have a daughter, Teri, 22, who has just graduated and has just started work in London as a web author. Jon’s parents are in their early 70s, fit and healthy, but Sue’s are much older; her father has dementia and her mother, his carer has just had a stroke. Neither of them have wills or powers of attorney, so social services have approached Jon and Sue, now that both parents will need to go into residential care.

Sue’s parents owned their own home and have significant savings, £95,000, so although social services have provided a care assessment, they are unwilling or unable to provide any other support. Jon and Sue have to find a care home, so find a home they like the look of, that Sue’s parents can both stay in, but does not have a Local Authority rate and will not accept part funded residents. As time is pressing, Jon and Sue get her parents moved into the home and make payments personally, pending a sort-out of her parent’s finances and selling the old family home.

Just as the dust settles, Teri asks if they could act as guarantor and could she have a loan of £25,000 for the deposit on a flat she likes in easy reach of her new job. As an only child, Teri is a little spoilt, so the house deposit and the guarantee is given without much thought to the consequences.

In the meantime, the residential home has asked for a significant rise in the fees payable as Sue’s parents are much more dependent than expected. Jon and Sue are not too concerned, as they believe it will not be too much trouble to meet the fees from the parent’s resources.

Now they hit a snag, Sue’s mother is no longer able to access the joint bank account, as the bank no longer recognizes her signature. Jon and Sue do not have power of attorney for either parent, so they can no longer access the parent’s savings, neither can they sell the family home.

After many months’ delay and £10,000 in legal fees, the Court of Protection grants Jon and Sue powers of administration, but the majority of the £95,000 is now used to pay off loans taken out by Jon and Sue to fund care fees and the legal fees incurred in accessing the money in the first place.

At this point Jon and Sue realize that they are in trouble; her parent’s house has deteriorated while it was unoccupied and the estate agent has suggested that it is only worth £125,000 in its current state, which they calculate could easily be spent in 18 months and with no end in sight.

In situations like these, there can be no happy ending, the best we can hope for is a least-worst outcome, but without some pre-planning and knowledge of how the care system functions, one possible outcome is:

  • Jon and Sue remain the contracted party to the care home, until they are declared bankrupt.
  • They never get to top up their pensions, so will be poorer in retirement than their parents.
  • Teri loses her flat, as without a guarantor, she cannot find a mortgage provider and has to sell.
  • Sue’s parents are forced to leave the current care home and are re-homed separately, eventually funded by the NHS and social services. By the time the parent’s home is sold, there is no inheritance for Sue.

In an ideal world, Sue’s parents would have a will and power of attorney in place; the liability for the care home fees would have fallen on Sue’s parents rather than Jon and Sue and with some management of their declining funds and a regular reassessment of their care needs, Sue would ultimately have received a small inheritance. Jon and Sue would add to their retirement funds and Teri would have enough saved for a flat deposit on her own, (although mostly gifted to her by grandparents and parents!) The early use of professional financial advice makes the ideal scenario much more likely – ideally personalised advice for each generation.

If you would like to know more about how we can help you plan and realise your financial goals then contact us at or call us on 01223 792 196.

The information contained is for guidance only and does not constitute financial advice. It is based on our understanding of UK legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. Accordingly no responsibility can be assumed by Martin-Redman Partners its officers or employees, for any loss in connection with the content hereof and any such action or inaction.