• Older people’s wealth grew 5 times more over last decade than younger people’s, finds new report
• ILC launches ‘the Strengthening the intergenerational contract report’ with M&G

New research published today by the International Longevity Centre UK (ILC), in partnership with M&G plc, warns this intergenerational contract is under mounting pressure due to demographic change, low economic growth and rising inequality.

The intergenerational contract is the principle whereby different generations support one another at different points in their lives and plays a critical role in sustaining our welfare system, health service, schools and the very infrastructure we use in our daily lives.

While UK household wealth has doubled relative to incomes over the last 20 years, older people have benefitted disproportionately while younger generations are struggling, for example:

• Median total wealth for someone in their late 60s increased by 46% (£112,597) between 2010-11 and 2019-20, but only by 9% (£6,751) for someone in their late 30s.
• The share of wealth held by younger people has plummeted, with just 4% of wealth held by under-40s (down from 7.5% in 2010).
• Despite the wealth of older households increasing, 7 in 10 adults don’t receive any financial support from their families.

ILC analysis of a YouGov survey found that:

• 47% of people are worried that they won’t have enough money saved for retirement; increasing to 60% for people aged 25-49.
• More than two in five (43%) of people under 50 are worried about not being able to pay their rent or mortgage

Across generations, people believe that government support for older generations is likely to decrease in the future. More than half of respondents aged 25 and over (56%) believe government support for older generations will have decreased by the time today’s younger generations reach retirement age.

The report, Strengthening the intergenerational contract: investing for intergenerational fairness, warns:

• By 2040, almost 1 in 4 people in the UK will be aged 65 or over, compared with just under 1 in 5 today
• Wealth inequalities are on the rise
• Sluggish economic growth will limit people’s ability to save, invest and spend in the way previous generations have

The report sets out three key recommendations for policymakers, working closely with the financial services industry, to strengthen the UK’s intergenerational contract:

• Support future generations’ retirement incomes: Increase auto-enrolment contributions to 12% for workplace pensions. Broaden access to include those not currently covered, such as the self-employed.
• Democratise access to savings products from birth: Automatically provide savings accounts for all children at birth to create a culture of saving. In practical terms, this involves exploring specific nudges that could encourage family and friends to establish regular contributions, alongside providing greater education about available assets to enhance returns.

• Pool risk and support long-term investment for the benefit of future generations: Develop and improve investment vehicles which pool risks across generations, such as With Profit Funds and Collective Defined Contribution schemes, ensuring financial products offer consumers both security and flexibility and enhance individual welfare. Prioritise value over cost, and investment in the long-term interests of future generations.

David Sinclair, Chief Executive at the ILC, said: “We have managed to get ourselves into a complete pickle. Wealth has become increasingly concentrated among older generations, while younger people are struggling to get ahead. If we don’t act now, these inequalities will only worsen, leaving younger generations facing even greater challenges.”

“The intergenerational contract is under serious strain, and we need bold action from both the government and financial institutions to fix this mess.”

“With the Government’s review on pensions adequacy for current and future generations put on ice, we need Government and industry to work together to truly look to the long term.

The upcoming Spending Review is an opportunity for the Government to work with financial institutions to redress the growing wealth gap between young and old.”

Clive Bolton, CEO Life Insurance at M&G, said: “For over 70 years the intergenerational contract has been an integral part of British society. It matters because the contribution we make is a downpayment on the future support we receive in old age, as well as providing the support we all need in the early stages of our life. It’s a critical part of our daily lives – it supports our welfare system, health service, schools and the investment which powers the critical infrastructure that communities all use and rely on.

Pensions and investments has a critical role to play to ensure the intergenerational contract continues to support society. As part of M&G plc, our £129bn Prudential With Profits Fund and its smoothing mechanism navigates the ups and down of the economy, benefiting all savers, as well as investing directly in the communities where savers work and live.

It works on the simple premise that each generation of policyholders defers some of their bonuses to invest in future generations, as previous generations did before them. It aims to be a virtuous circle, while sustaining the real economy and delivering wider societal benefits we all enjoy.

“In the face of changing demographic trends, the challenge now is to put in place new support for the next generation of savers so the generational bond remains strong. By giving people the confidence to make informed financial choices we can ensure the intergenerational contract evolves and continues to support individuals and society.”

You can download the full report here: Strengthening the intergenerational contract: investing for intergenerational fairness – ILCUK

Ends

The ILC organised a webinar to discuss the findings of the report on Tuesday 21 January 2025. Speakers include Bobby Duffy, Professor of Public Policy and Director of the Policy Institute and author of books including Generations: Does when you’re born shape who you are? and Molly Broome, Economist at the Resolution Foundation, whose work focuses on intergenerational fairness and wealth inequality.

To watch the event on YouTube please click here

Contact

Press@ilcuk.org.uk or +44 (0) 7736 124 096. Spokespeople are available on request.

M&G – mandgpressoffice@mandg.com  Spokespeople are available on request.

Notes

The ILC’s Strengthening the intergenerational project, supported by M&G seeks to explore people’s perceptions and experiences of intergenerational inequalities, with a view to identifying solutions that will help strengthen the intergenerational contract and support the wellbeing of all generations.

What is the intergenerational contract? The intergenerational contract is the principle that guides our welfare system. It means that someone who pays in, whatever their age, at whatever stage in life, feels confident that they will benefit. For example, the taxes we pay when we work go towards funding the education of younger generations, and the healthcare and state pensions of older generations.

As part of the project, ILC and M&G commissioned a YouGov survey of 2,054 adults. Fieldwork was undertaken between 15th – 16th May 2024.  The survey was carried out online. The figures have been weighted and are representative of all UK adults (aged 18+).

Other sources

Analysis of the Wealth and Assets Survey Wave 3 and Round 7. Real value, adjusted using ONS CPIH Index (base year 2015). Median wealth. Weighted estimates.

ILC analysis in 2023: share of wealth held by under-40s has plummeted over the past decade – from £7.53 in every £100 to only £3.98 Pensioner poverty – the widening wealth gap between generations – ILCUK

About M&G

M&G plc is a leading international savings and investments business, managing money for around 5 million retail clients and more than 800 institutional clients in 26 markets. As at 30 June 2024, we had £346.1 billion of assets management and administration.

With a heritage dating back more than 170 years, M&G plc has a long history of innovation in savings and investments, combining asset management and insurance expertise to offer a wide range of solutions. We serve our retail and savings clients under the M&G Wealth and Prudential brands in the UK and Europe, and under the M&G Investments brand for asset management clients globally.