Published in The Telegraph Business Club February 2009
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Only when the tide goes out
by Dianne Bown-Wilson
The demographics have been heading only one way for some years now. But whilst the population has been getting steadily older it seems government, employers, and individuals themselves have largely been in denial hoping the problem will go away, despite some introductory measures such as Age Discrimination legislation.
The situation has now been brought into very clear perspective by the arrival of the credit crunch and the recession. To roll together a couple of very apt quotations, “Only when the tide goes out can you see the rocks on the sea bed or who’s swimming naked”.
House prices have fallen, pension funds have been depleted, savings levels have dropped and jobs are disappearing. All at a time when we can expect to live longer and longer. When we set up our organisation, in my prime, some three years ago we thought our main focus was on the 50 to 75 year old section of the population. This is still very much our area of activity but it is now quite obvious that if we wait for people to reach that magic age of 50 or thereabouts it is likely to be too late to put into place the groundwork necessary to ensure that the remainder of our lives will be truly “primetastic”.
The issues, therefore, do not relate solely to those who are in their prime - it is a concern for all of us for all of our working lives.
An analysis of the latest official UK statistics shows just what is happening.
From 1971 to 2007 the UK population grew quite slowly, but it is now forecast to continue increasing at the rate of about two million every five years reaching 71 million by 2031. The increase is coming from people living longer and from a net migration inwards. As a result of the low birth rate we will see fewer young people entering the potential workforce pool.
Lower birth rates and greater longevity within the UK population are resulting in a huge shift in demographics. In 1971 nearly seven in 10 were under 50 and three in 10 were 50 plus. By 2031 the proportion of those over 50 will have reached nearly four in 10. Currently, slightly over one third, i.e. over 20 million, of our sixty million people is over 50.
Despite the current recession, which we have to assume will end eventually, the implications of this for the future include skills shortages; initiatives to bring more women into/back into the workplace; increased numbers of workers from other countries; and the need to retain older workers.
At the end of 2008 it was headlined in some newspapers that we are now a nation of pensioners. The reason is that for the first time the numbers of those reaching state pension age (65 for men and 60 for women) had overtaken those who are under 16, the percentages being about 19% of the population for each.
In 2010, to try to redress the balance, the state pension age for women will be increased until by 2020 it reaches 65, the same as for men. Only 20 years later, in 2041, almost one quarter of the population will be 65 or more. Looking at this in the context of the “support ratio” required to finance the state pensions, health costs, and welfare of older people we see that whereas in 1971 there were 4.6 in the 16-64 arena for each person of 65 plus, this will drop to 2.7 by 2031 and only 2.1 by 2081.
As a result between 2024 and 2046, the state pension age for both men and women will be raised from 65 to 68. People will be expected to work longer and, obviously, if not already scrapped, the default retirement age will have to move also.
How does this longer working life fit into the context of our total lifespan?
There are two ways of estimating life expectancy used by the Office for National Statistics (ONS). The one most quoted, “period” life expectancy, is arrived at by presuming that the existing mortality rates at a particular time will continue on into the future. However, the one which ONS believes gives a better picture of expected longevity builds in the anticipated changes (to date improvements) in mortality going on into the future and therefore to be experienced by the people concerned.
For a man who reached 65 in 1981 improving life expectancy means he can expect to live to 86 and a woman to 88. And, on this basis, a man reaching 65 in 2030 may expect to live to 88 and a woman to 90. By 2056 the figures become 91 and 93 respectively. The issues are certainly not confined only to today’s over 50s. The chances of reaching 65 for those being born now are 91% for males and 94% for females providing life expectancies of around 92 and 94 years respectively.
Quality of life
What does this say for our retirement? Well, even with the state pension age rising to 68 for both men and women, we will see an anticipated retirement of well over 20 years. This is a long time to finance oneself without working, a long time to fill in an interesting, fulfilling and valued way, and a long time to stay physically and mentally healthy.
Unfortunately length of life is not automatically associated with quality of life and, although life expectancy is increasing, a number of our final years will be in less than perfect health. The ONS estimates that on average men can expect about seven of their final years to be associated with a limiting longstanding illness and women about nine years. Preventative medicine still has a long way to go.
In terms of working longer we are already seeing increasing numbers of people working on beyond state pension age. Since 2000 the proportion of men of 65 and over who are working has increased from 7.3% to 10.6%. For women of 60 and over the figures are 8.4% and 12.5% Although these numbers are still fairly low in absolute terms they are growing rapidly as many people want or need to continue working longer (and will increase further as the state pension age for women increases).
It’s all very well increasing retirement ages but will we be fit enough to work and will the workplace provide an appropriate environment? The message is clear. We all - as individuals and employers - need to take our heads out of the sand and make better plans for the future.