It’s not going away!

This week I attended the first in a series of seminars under the title “Just Ageing” (http://justageing.equalityhumanrights.com/) which is being organised by the Equality and Human Rights Commission (EHRC) and the new charity formed from the merger of Age Concern and Help the Aged. The first seminar looked at our assumptions about the process of ageing itself during which Professor Tom Kirkwood, Director of The Institute for Ageing and Health at Newcastle University, gave a fascinating talk on the physiological and social experience of ageing.

I can’t really do justice here to his exposition which in itself was a huge summarisation of the work being undertaken. However, the message coming through loud and clear is that human beings are not per se programmed to die at any particular time – indeed the survival instinct in us is strong right to the end. So, under the right circumstances, increasing life expectancy can be expected to continue and we should celebrate old age, not see it as form of disability or inconvenience. What does happen is that imperfections in us and breakdowns in our ability to function bring on the end of our lives and if these can be eliminated or minimised then our life spans can be increased. Furthermore, many of the causes of this are “malleable” – things such as diet, housing, education, exercise, negative stress – as evidenced by differing life expectancies in different environments even within the same country.

This was the third seminar, organised by varying bodies, that I had attended in the space of a week each focusing on a differing aspect of ageing. There is much excellent work taking place and it is clear that the momentum is increasing. However, to date, government seems to concentrate only on the short term without a real “statesmanlike” approach to the longer term questions, employers (with a few exceptions) seem concerned only with damage limitation and containment of costs, and amongst the population at large there is a massive lack of awareness of the issues involved.

When will all this be pulled together?

Pension Reform and Personal Accounts after the Credit Crunch

Last Tuesday (24^th March) the International Longevity Centre-UK (ILC-UK) and the Actuarial Profession hosted a Joint Debate at the Institute of Actuaries in London on aspects of pension reform and personal accounts and the implications of the current credit crunch.

Chaired by Baroness Sally Greengross and introduced by a speech from Nigel Waterson MP, Shadow Pensions Minister and Shadow Minister for Older People, the 2-hour session was remarkably interesting (if you’re into that kind of thing) and was extremely well-attended, mostly by people from within the pensions, actuarial and financial services industry.

As this was a debate mainly consisting of people inside the industry “looking out” there was a substantial element of “preaching to the basically converted” and much of the debate was about the “how” of saving for one’s old age and whether this did the trick. There was, therefore, a lot of comment regarding what one might consider to be the technicalities of structuring and operating a pension scheme. Also, running through, was the (unsupported) hope that people would move away from property as the means to save and back towards pensions.

In this latter respect research by the Pensions Policy Institute, represented by Niki Cleal, was particularly revealing. Her comment was, in a nutshell, that those who saved probably saved across the board, that is pensions, property and ISAs etc., in contrast to those who probably had little of any. This is not a case of substitution and changing asset allocation.

Rather, we believe,  this is due to:-

1)       the lack of sufficient resources for people to be able to save at the current time, or possibly any time

2)       the phenomenal lack of understanding, generally, of what it will take to support oneself in old age in an appropriate style and over an extended and growing potential lifespan.

It is, therefore, the “why” people need to save that must also be addressed. There is an enormous educational task to be undertaken among the population in general and, until this is carried out, even the best designed schemes will have difficulty in succeeding. But all this is manageable given the will.

We are not talking deckchairs, shuffling, Titanic…yet.

The tipping point – we are there!

When we set up in my prime we thought that our main point of focus was on the 50 to 75 year old section of the population which was clearly not elderly but was perceived so by the rest of the universe and, indeed, many members of that generation themselves. In consequence the legend we attached to our name was “in my prime – for mature people re-thinking their lives”.

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 for that part of our lives to be truly “in our prime”.

The demographics have been heading only one way for some years now but, we believe, government, employers, and individuals themselves have been in denial hoping the problem will go away, won’t affect us personally, or somehow will be someone else’s problem, despite some introductory measures such as Age Discrimination legislation. It is quite apparent that none of these is true and that the march of time has finally caught up with us. It has also 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. The issue, therefore, does not relate solely to those who are in their prime but also to anyone who hopes at some stage to reach that position – it is an issue for us for all of our working lives – from the beginning to the end, and beyond.

Here now we provide an analysis of the latest official UK statistics which show just what is happening and will be happening.

The period from 1971 to 2007 has seen the UK population grow from 56 million to 61 million, that is overall quite slowly, but it is now forecast to continue increasing at the rate of about 2 million every 5 years reaching 71 million by 2031. However, these figures mask a range of changes taking place and issues arising within these figures.

The number of children required per woman to keep the population steady is 2.1 but the present rate, although rising from an all time low in 2001 of 1.6, is only 1.9 (2007), on its own suggesting a drop in population. The increase is coming from people living longer and from a net migration inwards. The increase from 2007 to 2031 is reckoned to be 47% due to net migration and 53% due to net natural change. As a result of the low birth rate we will see fewer young people entering the potential workforce pool.

Despite the current recession, which we have to assume we will come out of, the implications of this looking into the future are: skills shortages; initiatives to bring more women into/back into the workplace; increased numbers of workers from other countries; the need to retain older workers.

With lower birth rates and greater longevity we see that, within the total UK population figure there is a huge shift in demographics. In 1971 nearly 7 in 10 were under 50 and 3 in 10 were 50 plus. By 2031 the proportion of those over 50 will have reached nearly 4 in 10. Currently, slightly over one third of our sixty million people are over 50, that is in excess of 20 million.

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, just, those who are under 16, the percentages being about 19% of the population for each.

Hence, we are about to see the first of the measures coming in, starting in 2010, to try to redress the balance, particularly in respect of the demands on the public purse. Between 2010 and 2020 the state pension age for women will be increased until it reaches 65, the same as for men.

And so adjusting our numbers for this we can see that the 2007 figures for those 65 or over consequently drop to 16% compared with the 19% for those under 16. However, this is only a temporary respite and by 2021 we are back to equal percentages again. And from then on it becomes progressively more and more stretched. Only 20 years later, in 2041, almost one quarter of the population will be 65 or more, 17% will be under 16 and the working population, needed to support both ends of the spectrum, will constitute 59%.

Looking at this in the context of the “support ratio” as it relates to older people, that is financing their state pensions, health costs, welfare etc., we see that in 1971 there were 4.6 in the 16-64 arena for each person of 65 plus but this drops to 2.7 by 2031 and only 2.1 by 2081.

And so we see the second of the state pension measures being introduced. Between 2024 and 2046, in three phases, 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, the default retirement age will have to move by at least this, if not scrapped altogether, although this has yet to come.

And how does this longer working life fit into the context of our total lifespan?

There are 2 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 (“cohort”) concerned.

For a man who reached 65 in 1981 the period life expectancy was to live to 78, and for a woman to live to 82. By 2006 this had increased to 82 for a man and 85 for a woman. However, if we take into consideration improving life expectancy a man can, in fact, 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 to only today’s over 50s.

With improving mortality a male born in 2006 has a life expectancy at birth of 88 and a female of 91. If they reach 50 years old they can then expect to live to 90 and 93 respectively. The chances at birth of reaching 65 are now 91% for a male and 94% for a female and will provide life expectancies of around 92 and 94 respectively.

And so the figures pile up. Greater chances of living to 75, 85 and 100 plus and a larger and larger proportion of the population made up of the elderly.

And 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 around 22 years for men and 24 years for women. The notion that retirement is a few twilight years after a lifetime of slog is no longer relevant.

And 22 or 24 years 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. It means people will work for, say, 40 to 50 years and then be without paid employment for 20 to 25 years. In itself this is a lot of years but it is also a large proportion of one’s life.

But 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 Office for National Statistics calculates two types of health expectations in this respect. Healthy Life Expectancy (HLE) defines healthy life as years in good or fairly good self-perceived general health. Disability-free Life Expectancy defines healthy life as years free from limiting longstanding illness. On average men can expect about 7 of their final years to be associated with a limiting longstanding illness and women about 9 years. There is still a lot to do.

It’s all very well increasing retirement ages but will we be fit enough to work and will the workplace provide an appropriate environment?

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%. And for women of 60 and over the figures are 8.4% and 12.5 %. The latter figure will obviously increase as the state pension age increases for women start to kick in. Although these numbers are still fairly low in absolute terms they are growing rapidly as many people choose or feel the need to continue working longer.

Longer life or living death?

A neat summary of the predicament that we humans find ourselves in was provided yesterday by Karen Dunnell, chief of the Office of National Statistics (ONS):-
“Medicine hasn’t been good at preventing things happening to you, but it has been very good at stopping you dying” she commented in a launch of a new report on increased longevity.

No doubt she didn’t really intend it to come out that way, but the thought of living in a state where we are stripped of free will and relegated to a state of eternal longevity is scary and bizarre. The implication - longer life in a state of impaired health and ability –  isn’t great either.

Bearing in mind that by 2032 more than three million people are expected to live to at least 85 – more than double the 1.3m today, it’s obvious that even without preventative medicine we’re all lasting longer. Yet surely quality of life has got to be a greater concern than simply more years – and that being the case, as Ms Dunnell says, it has to be down to all of us individually to take responsibility for doing all we can to “prevent things happening to us.”

Pass me another broccoli and fish oil smoothie.