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.

Read the full report here or via the button below.

Throughout our lives, we all give and receive support across the generations, within our families and as part of society as a whole. This is the intergenerational contract; the principle whereby different generations support one another at different points in their lives, depending on their needs and resources.

The intergenerational contract relies on shared values, such as trust, reciprocity and fairness, and is key for social cohesion. For example, the taxes we pay go towards funding the education of younger generations, and the healthcare and state pensions of older generations. But increasingly, the combined challenges of demographic change, low economic growth, and rising inequality mean we may no longer be getting back what we pay in.

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

• The median total wealth for those aged 65 to 69 increased by 46%, or £112,597, between 2010-11 and 2019-20.
• The median wealth for those in their late thirties in 2019-20 increased by just 9%, or £6,751, during the same period.
• Despite the wealth of older households increasing, 7 out of 10 adults don’t receive any financial support from their families. And the share of wealth held by younger people has plummeted, with just 4% of wealth held by the under-40s (down from 7.5% in 2010).

Family plays an important role in supporting the welfare of different generations. However, financial transfers within families risk perpetuating wealth inequalities both within and across generations. Not everyone has equal access to resources or the ability to provide the same level of support.

Policymakers and financial service providers are vital to ensuring that the intergenerational contract remains on an even keel. Policymakers must work in conjunction with financial services providers to create a cultural and attitudinal shift around long-term savings and investments. The report calls on policymakers and financial service providers to:

• Support future generations’ retirement incomes: increase workplace pension auto-enrolment contributions to 12%, with a clear roadmap for how and when contribution rates will rise, ensuring this is sustainable for both employees and employers. Broaden access to include those not currently covered, such as the self-employed.
• Democratise access to savings products from birth: provide savings accounts for all children at birth, to help create a culture of saving. Currently, the onus is on families and carers to set up savings accounts, rather than providing them as a default. In practical terms, this should involve exploring which specific nudges might encourage family and friends to set up regular contributions, as well as providing greater education to all about which investment assets are available to enhance returns.
• Support long-term investment to pool risk for the benefit of future generations: develop and improve investment vehicles which pool risk across generations, such as With-Profit Funds and Collective Defined Contribution schemes. Ensure that financial products offer consumers both security and flexibility, while enhancing individual welfare. Prioritise value over cost, prioritising investment in the long-term interests of future generations.

Alongside these recommendations, we need the Government to invest in long-term sustainable growth, population health and financial literacy.

This research is supported by M&G plc. For the full report please click button below.