How to solve a problem like longevity

Many years ago, when a younger me began to write pension articles, it was easy to be a bit blasé about some of the projections. As you get older you become more a part of the data and thus the implications appear starker.

There is nothing that illustrates this more than longevity.

Undoubtedly, longevity is universally a good thing. The problem comes when society has to make this work.

A collection of the headline statistics from Age UK ‘Later Life in the United Kingdom’ (October 2016) makes for a chilling read:

  • 11.6 million people are aged 65 or over.
  • More than 1.5 million people are aged 85 or over.
  • There are more people aged 60 and above than there are aged under 18.
  • The number of centenarians living in the UK has risen by 72% over the last decade to 14,450 in 2014
  • UK life expectancies at age 65 are 85.9 for women and 83.4 for men (life expectancy at birth increased by 1.5 years for males and 1.1 years for females between 2006-08 and 2011-13)
  • By 2040, nearly 1 in 4 people will be aged 65 or over.
  • The proportion of the population aged over 75 is projected to double in the next 30 years
  • Nearly 1 in 5 people will live to 100, including 29% of people born in 2011.

It is now quite common to see newspaper headlines like ‘Work until you’re 80’ or ‘Don’t expect to retire until you’re 100’. Indeed in many headlines the idea of working until you die and never retiring is becoming more popular.

I then came across some further figures based on population projections by the Office for Budget Responsibility. They suggested that the state pension age could rise to 74 by 2060, when there could be more than a million people over 100 years old.

It was this last figure that really caught my attention: ‘more than a million people over 100 years old’. Very simplistically I thought to myself, how often do you come across a centenarian in your day-to-day business – now what will it be like when there are in excess of a million? Furthermore, with that many people over 100, how many will be over 75?

Another pension headline caught my eye; ‘State pension age could rise above lifespan in poorer areas’. This was in relation to the cost of the triple lock, however, there is a danger that we set an age that a number of people cannot achieve or, more crucially, cannot achieve free of ill-health. In 2010 Professor Marmot, in his report ‘Fair Society, Healthy Lives’, made the point that more than three quarters of the population do not have disability-free life expectancy as far as age 68 – the pensionable age to which we are moving towards.

So what does all this mean?

  1. An awful lot of old people
  2. Fewer younger people to pay tax to subsidise
  3. Consequently, less tax to increase state pension and other state benefits
  4. A state pension age which some will get to in ill-health
  5. The need to look at means testing and/or taxation post-state pension age

Against a backdrop of intergenerational difference and pensioners earning more than the current generation in work, it’s clear that we are storing up some serious issues for the future.

Head of Platform Technical

Mike Morrison has worked in financial services for far too many years. In 1990 he joined Winterthur (now AXAWealth) as Technical Manager, playing an instrumental role in the development of their SIPP product and later their pioneering work on income drawdown.

Mike is an ex Chairman of AMPS (the Association of Member Directed Pension Schemes) and is on the Financial Planning Committee of the ICAEW. He is also an Associate of the Pensions Management Institute and the Chartered Insurance Institute, and he holds both an LLB and an LLM in European Law.

An accomplished speaker and writer on financial services matters, Mike is passionate about retirement and savings issues, and how we can better communicate these to a wider audience.

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