UK baby boomers and Gen Xers have handed their families £ 8.2billion back since the start of the Covid-19 pandemic, prompting them to be called the ‘unsung heroes’ of the crisis.
One in four of the over-50s has supported family members at some point during the pandemic, loaning 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 bank equivalent of one of the top ten mortgage lenders, the numbers still represent a whopping 44% increase in the amount remitted. compared to the previous one. year.
According to the study by financial firm OneFamily, more than half of parents and grandparents plundered their savings to do so, with more daughters supporting daughters than sons – reflecting the greater likelihood that women are financially affected by Covid than men.
“When we think of the financial effects of the pandemic, we think of the Millennials, who have been among the hardest hit,” says Matthew Ellis of OneFamily Advice.
“However… whether they drew on their savings, took money from ISAs, or even sold their belongings, Gen X and Baby Boomers have been an important pillar in supporting the younger generations over the years. past year. “
This is nothing new, however.
The study suggests that one in 20 people over 50 took money from credit cards and a small proportion – around 2% – said they sold goods to be able to help.
But with financial support largely provided by people in the older generations with available funds held in savings and checking accounts, the figures also suggest that the significant and growing problems of wealth and income inequality are ‘worsen with each passing generation.
Even in the year before the emergence of Covid-19 around the world, official figures from the Office for National Statistics (ONS) show that income inequality was on the rise.
In the year up to March 2020, income inequality rose to over 36% on a scale in which 0% represents complete equality and 100% means that one person receives all income at the same time. exclusion of all others.
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 also widened, with the income share of the richest 1% increasing from 7% to 8.3% of all income between 2011 and 2020. .
Those who have and accumulate wealth are now passing it on in greater numbers, as Covid data shows. But this movement has grown as a proportion of national income in the UK since the 1970s and is expected to continue.
The older generations hold more wealth than their predecessors and the younger generations do not have higher incomes than the generation above them.
As a result, the Institute for Fiscal Studies (IFS) predicts that inheritances will constitute an increasingly large part of lifetime income and wealth, with those born in the 1980s expected to receive average inheritances relative to the income of the family. ‘a life that should be almost twice as high as for those born in the 1960s.
This would mark a profound social change, which means that people’s incomes and standard of living are increasingly determined by what they receive from their parents rather than what they earn themselves, driving inequalities. to new heights.
In fact, the think tank estimates that millennials whose parents are in the bottom fifth of the nation’s wealth distribution will see their lifetime income increase by 5%, while those whose parents are in the top fifth will see their income. average increase by 29%.
In other words, inheritance will make it increasingly difficult for those with poor parents to move up the income distribution, as their smaller inheritances mean they have more ground to catch up, according to the IFS. .
“The increasing levels of wealth held by the older generations and the lack of income growth for the younger generations together lead to an intergenerational economic divide,” says David Sturrock, senior research economist at IFS.
“But these trends also mean that inheritances will become more important in the future, widening the gap between those with rich parents and those with poor parents.”
“The pandemic has exposed and exacerbated social and economic inequalities within our society,” says Alex Beer, wellness program manager at the charity for social change, the Nuffield Foundation.
“This research sheds light on how these inequalities are set to increase further with the growing importance of inheritance in lifetime income.
“If we are to improve social mobility, policies must focus on improving the standard of living for all and on combating discrimination and disadvantage.”