How to help an ageing population stay wealthy for longer

Two thirds of the world’s population will be 65 years and above by 2050, according to the UN, and the projection for the global ageing economy is already estimated to reach $27 trillion by 2025 – there will be more people ageing and living longer.

Both governments and businesses will need to introduce innovative solutions, redesign and co-create some of the existing infrastructure and business models to create an economy and ecosystem that supports the needs and the demands of an ageing population.

Government

COVID-19 has caused a paradigm shift in the way we think, and has exposed gross injustices and inequalities rampant in our society. The appalling state of the aged care system was plain to see. Some of the world’s best healthcare systems were so quickly overwhelmed and reflected the state of under-preparedness, under-investment in both human and financial capital.

Declining fertility rates in the developed world coupled with increasing longevity means that we cannot depend on last century's models for infrastructure, employment laws or pension models.

The persistent near zero and in some cases negative interest rates means that retirees with savings have seen their incomes collapsing or disappearing all together. As it stands, millions in retirement or close to retirement are staring at the very real risk of running out of funds and/or experiencing severe old-age poverty.

It’s time for governments to go back to the drawing board and co-design policies that are more proactive, anticipatory and forward looking.

COVID-19 emboldened governments around the world to take action in ways and with speed never before imaginable. We have seen record-breaking stimulus packages around the world. The lesson here is that we can and must treat key societal challenges head-on and with the same sense of urgency and zeal.

Longevity can be harnessed as a force for good and a driver of economic growth not just from the perspective of an ageing population willing to spend money – a “spending” silver economy – but also from that of a “productive” silver economy.

Encouraging healthy longevity, creating opportunities and building modern infrastructure for lifelong learning, better healthcare systems and technology, can see nations with ageing populations who can be productive well into their eighties. Policymakers must integrate life-course approaches and inclusive policies in order to support people to lead a long, healthy and productive life.

Today, there are inequalities in access to pension funds or social security programmes. Those disproportionately affected tend to be women or low-skilled workers, leaving many in very precarious and vulnerable situations. Policymakers need to offer pathways to retraining and reskilling and assist all segments of society to stay active in life and in the labour market. It is important also to support the concept of a multi-generational workforce and stamp out ageism in all of its forms.

COVID-19 has demonstrated that without solidarity, empathy and a social safety net, we are all vulnerable, and only as strong as our weakest link.

Business

Worldwide, there are one billion people in retirement, which creates a multi-trillion dollar economic opportunity for businesses to tap into.

Banks like Credit Suisse, ABN Amro, Bank of America and Barclays have already recognized the importance of catering for this increasingly important segment. Many organizations are redesigning their banking and financial services to become more “age-friendly” and introduce technological innovation using “Agetch” to target those who hold the majority of the world’s share of wealth today. This year a bank called “Longevity Bank” will operate in the UK specifically targeting people who are 60 years-old and above.

One of the determining factors of health is economic stability and vice-versa: research shows that higher income and wealth are linked to better health and life expectancy in the US. Adults in their 60s, who are active and healthy, with a stable source of income, can still take out a loan and repay it over the 15 to 20 years of their remaining life.

A newly introduced model in Switzerland combines “Agetech” and “Healthtech”, highlighting the important link between health and wealth. There are an increasing number of financial providers that cater and diversify their products and services to support both the wealth and lifespan of their consumers.

With COVID-19, there was a marked increase in the number of adults over 55 years-old who used technology as a way to connect with friends and family, in the UK around 74% used smartphones. This demonstrates that age is not a barrier to adapting and learning. However, we must ensure that we have sufficient awareness and deterrence in place to protect the elderly and vulnerable from cybercrime, bullying and exploitation.

Consumer Mindshift

A crucial step is to raise awareness and change mindsets about life stages from the typical education/work/retirement trajectory to one that is more flexible and extended; such as education/work/education/work/active retirement.

This would need to be coupled with good financial literacy that equips people to plan for a long, independent and resilient financial life with adequate savings for retirement. Moreover, shifting mindsets and nudging behaviour towards financial planning and wellbeing can lead people to make better decisions and choices for the long term.

Pension funds and social security benefits tend to have complex calculations and formulae and many beneficiaries find it difficult and unpredictable to know their precise financial income in their old age. Giving the right level of literacy, making information clear, and regularly involving people in reviewing and managing their contributions can make a world of difference, especially when they feel more in charge of their financial wellbeing and future.

No country has got it right, much global collaboration is needed to put in place the right mix of policies and incentives to encourage people to look forward, plan ahead and stay active for longer in the workforce – through a combination of tax incentives, retraining opportunities and anti-ageism provisions. The goal is to match the increased lifespan with good health and greater prosperity.