The UK’s Baby Boomers and Gen Xers have handed over £8.2bn to family since the start of the Covid-19 pandemic, prompting calls to dub them the ‘unsung heroes’ of the crisis.
One in four of the over 50s supported members of their family at some point during the pandemic, lending an average of £1,300 each.
Although the Bank of Mum and Dad was already an established phenomenon before the pandemic hit, including collectively being the banking equivalent of a top ten mortgage lender, the numbers still represent a huge 44 per cent increase in the amount being handed over compared with the previous year.
More than half of parents and grandparents raided their savings to do so, the study by financial firm OneFamily found, with a larger number supporting daughters than sons - reflecting the greater likelihood of women being financially impacted by Covid than men.
“When we think about the pandemic’s financial effects, we think of the Millennials, who have been some of the most severely impacted,” says Matthew Ellis from OneFamily Advice.
“However… whether they have dipped into their savings, taken money from ISAs or even sold their personal belongings, Generation X and Baby Boomers have been an important pillar in supporting younger generations over the past year.”
That’s nothing new though.
The study suggests one in 20 of the over 50s took money from credit cards and a small proportion - around 2 per cent - said they sold belongings to be able to help out.
But with financial support largely provided by those among older generations with available funds held in savings and current accounts, the figures also hint at the significant and growing problems of wealth and income inequalities being compounded with every passing generation.
Even in the year before Covid-19 emerged globally, official figures from the Office for National Statistics (ONS) show income inequality was on the rise.
In the year to March 2020, income inequality rose to more than 36 per cent on a scale in which 0 per cent represents complete equality and 100 per cent means one person receives all the income to the exclusion of everyone else.
The 2020 figure - the latest available - is the highest since the 2008 financial crisis.
The gap between the richest in society and the rest of the population has widened too, with the income share of the richest 1 per cent increased from 7 per cent to 8.3 per cent of all earnings between 2011 and 2020.
Those who have and are accumulating wealth are now passing it on in ever greater numbers, as the Covid data shows. But that movement has been growing as a share of national income in the UK since the 1970s and looks set to continue.
Older generations hold more wealth than their predecessors and younger generations have incomes no higher than the generation above them.
As a result, the Institute for Fiscal Studies (IFS) predicts that inheritances will be an increasingly important part of lifetime income and wealth, with those born in the 1980s set to receive average inheritances compared with a lifetime’s income projected to be almost twice as large as for those born in the 1960s.
This would mark a profound social change, meaning that people’s incomes and living standards are increasingly determined by what they receive from their parents rather than what they earn themselves, driving inequality to new heights.
In fact, the think tank believes that Millennials whose parents are in the bottom fifth of the nation’s wealth distribution will see lifetime incomes increase by 5 per cent while those whose parents are in the top fifth will see an average income boost of 29 per cent.
In other words, inheritance will make it increasingly hard for those with poor parents to move up the income distribution, as their smaller inheritances mean they have more ground to make up, according to the IFS.
“The increasing levels of wealth held by older generations and the lack of income growth for younger generations are together driving an inter-generational economic divide,” says David Sturrock, a senior research economist at IFS.
“But these trends also mean that inheritances are set to become more important in future, widening the gap between those with rich parents and those with poor parents.”
“The pandemic has highlighted and exacerbated the social and economic inequalities within our society,” says Alex Beer, welfare programme head at the social change charity the Nuffield Foundation.
“This research shines a light on ways in which those inequalities are set to increase even further with the growing importance of inheritances in lifetime incomes.
“If we are to improve social mobility, policies need to focus on improving living standards for all and on tackling discrimination and disadvantage.”
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