I recently attended a talk given by Stuart Bastel-Gasten to the International Longevity Centre titled ‘Reimagining Ageing’.
The premise of the talk was to challenge the despair expressed in some quarters that society is about to be overrun by a tsunami of old people. He covered many topics in a short time, so I will be unable to do justice to his content in this short article. I will instead concentrate on the potential consequences for retirement income advice of what he was saying.
The number of over-65s is projected to grow rapidly due to increased longevity and the surge in baby boomers reaching that age. The dependency ratio is the number of working age people up to 65 divided by those over 65; there were 23 over-65s for every 100 of working age in 2010. By 2050 this is predicted to rise to 39.
Are these really old people? The use of age 65 as a definition of ‘old’ dates from the 1920’s and earlier. Then if you had been lucky enough to live until age 65 you only had a few more years to live. 65-year old’s today may expect to live, on average, close to 20 more years. In her book ‘Extra Time’, Camilla Cavendish defines those between ages 60 and 75 as ‘young-old’ and those over 75 as ‘old-old’.
To what extent are over-65s dependent upon those of a younger age? Latest statistics from the Office of National Statistics show how the tax take and State contribution varies by age.
State contribution is the cost of benefits and services provided by the State. Although the State pension age is currently a little over 65, it is not until age 68 that the State contribution is more than the tax take. With the numbers over age 65 in work rapidly increasing (over the last 10 years the number of over-70s in employment has doubled) it should be expected that the age 68 cross over will rapidly increase.
This brings us back to the talk given by Bastel-Gasten. He defines old age as someone who has a life expectancy of less than 15 years. On current projections this will be age 75 in 2050 and the number of old people over age 75 per 100 workers will be 22. This could influence future public policy. You can already hear the politicians saying: “What ageing crisis?”
This however all sounds like academic theory that has little relationship to real life. In some ways I would agree with that statement. In others I would not.
Currently 50% of 65-year old’s have two morbidity factors that may make it difficult for them to work. There are statistics on healthy life expectancy, and generally while increasing, it is not increasing as fast as longevity. Healthy life statistics are based upon opinions people have about themselves. They are therefore not as reliable as longevity statistics. There could be other influences at play.
Who is going to be dependent on the State and who is going to be a contributor?
Although public policy may be influenced by this, the work of Stuart and others, the people you advise will not. We are part of an evolution in attitudes and needs in retirement. Over the next 30 years the numbers who will consider working to age 75 and beyond will move from very few to the many. However, what that means for their working lives after age 50 remains to be seen. Will people want a sabbatical before the final period of their career to age 75 or beyond? Will people want to do something completely different in their final working years? Also, large numbers will – due to health and disabilities – be unable to experience those changes.
It is difficult to stereotype those we advise who are moving into retirement today. They have very little in common with those who were retiring when their careers commenced. Over the next 30 years we are looking at even further changes occurring at a rapid rate.
Currently, we are inventing new labels for those who pass their 65th birthday – ‘unretired’ is becoming more common. I am sure we hear more about ‘young-old’ and ‘old-old’. I’m not sure these titles will stay the course to 2050 because, by then, other labels will probably be in use. But, why is this important?
For many their ‘retirement’ objectives will become more complicated. Also, how they fund those objectives will have to become more flexible to reflect other sources of income and the assets, including houses, available to them.
Already those who seek retirement advice are all unique. As society changes so will a tapestry of new issues, and clients will require new solutions to emerge. This will become more complicated as social policy adapts to a changing society. More will need and seek advice to help find solutions for their circumstances.
One thing we can be certain of however – retirement income planning will not be dull over the next 30 years.
Bob Champion is chairman of the Air Later Life Academy