Could baby boomers be the answer to the nation's savings woes?

Experts are calling on the over 65s to help solve the nation’s funding gap

Pensioners' incomes are growing faster than those of the working population.

A major new study has called for baby boomers to “fundamentally rethink how they pass on their wealth” in order to solve the funding problems younger generations are facing with savings, pensions and property shortfall.

Data from leading economic think-thank the Centre for Economic and Business Research (Cebr) and wealth manager Brewin Dolphin has found that adults under 44-years-old are failing to save for the short or long term and face an individual pensions shortfall of more than half a million pounds.

On average, 18-44 year olds think that an income of £30,000 per year in today’s prices would be enough to afford them a comfortable lifestyle in retirement. However, they would need a personal pension pot of £725,000 to buy an annuity for that kind of income. With improving life expectancy the cost of this annuity is only likely to increase. With an average current savings pot of only £175,000, that's a shortfall of £550,000 each.

In fact, to achieve it, an 18-year-old would need to save around £440 a month, a 30 year-old would need to save £790, and a 44-year-old would need to put aside a hefty £1,840.

At the same time, overall UK households today save only 6p for every pound compared with the 15p they typically set aside in 1992. Even higher-income groups think they do not have enough spare cash to save, with more than one in 10 households with an income of £100,000-150,000 saving next to nothing.

Meanwhile, pensioners’ incomes are rising faster than the typical income for the working population thanks to generous final-salary pensions, the current "triple lock" on state pensions and the small matter of property ownership worth £1.3 trillion.

The push for wealth redistribution has been floated before, including controversial proposals to encourage older homeowners to downsize. However willing older generations may be to pass on their cash, they're just not interested in doing it right now.

Almost 80 per cent of over-55s who plan to support their families financially expect to simply leave all or part of their assets through their will. This latest study suggests, however, that gifting and investing one "silver pound" today could actually be worth three times as much to grandchildren as inheriting a one off lump sum later thanks to the effects of compound interest and investment returns. Although this could also offer significant savings in inheritance tax, only 2 per cent of over 65s have or would consider the move.

Brewin Dolphin called on the Government to consider a range of incentives to support the wealth handover, such as the introduction of a "saving for grandchildren" tax incentive scheme that would see a gift of 10 per cent from a grandparent’s estate reduce their IHT rate from 40 per cent to 36 per cent – similar to the current charitable giving scheme.

The firm also advises that gifts to grandchildren should be immediately removed from the estate of their grandparents for inheritance tax purposes, scrapping the current tapering seven-year rule.

“The harsh reality this country faces, is that the outgoing Baby Boomer generation will be the last to enjoy a comfortable retirement unless urgent action is taken now,” says Liz Alley, divisional director of financial planning at Brewin Dolphin. “We are calling for older people to fundamentally rethink how and when they pass on their wealth to younger relatives. The solutions we are proposing today are based on earlier and regular gifting as part of a strategic financial plan, rather than focusing on a one-off inheritance. This could help set grandchildren up for life as well as reduce inheritance tax.”