One in eight (13%) of retirees plan to cut back on gifting to children and grandchildren, according to a new study.

The figure rises to almost one in six, or 16%, among younger retirees with higher-than-average incomes, and 15% among their lower-income peers.

That suggests that even those with relatively strong financial positions are cutting back, reckons Quilter, the firm behind the research.

Its Retirement Lifestyle Report showed the average retiree currently spends more than £2,500 annually supporting younger family members - £1,323 in gifts and £1,175 towards education.

Many retirees, particularly those with higher incomes, gift much more than the average, and many are far exceeding the current annual gifting allowance of £3,000, the firm pointed out.

Younger, higher income retirees, for example, gift an average of £4,836 to relatives and a further £5,280 towards education annually.

While breaching the annual gifting allowance does not automatically trigger a tax liability, unless the donor dies within seven years, it introduces complexity, the firm said.

The gifting allowance has remained frozen for over 40 years and, had it kept pace with inflation, would now sit at £12,000. Quilter has called on the government to modernise the allowance.

Shaun Moore, tax and financial planning expert at Quilter, said: “The gifting allowance is a relic of a different economic era. Even a modest increase to £9,000, for example, would better reflect modern financial realities, ensure it aligns with existing savings vehicles such as the Junior ISA, and could allow families to support one another more freely and purposefully.

“The rumour mill is already in overdrive as we near the Chancellor’s upcoming budget and has so far seen a potential lifetime cap on gifting, an extension to the period donors must live after making a gift before it falls outside of their estate for IHT purposes, and the potential for a further freeze on the nil rate band all debated.”

He said any review of gifting rules should be considered alongside the outdated gifting allowances.