In a range of areas, public understanding and government policy has not fully caught up with the impact of demographic change. By 2050, one in three people in the UK will be over the age of 65. Yet it is often believed that we will spend long enough working to pay for our retirement; that our standard of living in retirement will be constant; and that it is a good thing to retire people early as there are not enough jobs for everyone.
Booz & Company has concluded its New Demographics roundtable series with an urgent call to action from both the public and private sector to respond to the challenges and opportunities presented by the speed and scale at which the UK population is ageing.
From February 2007 to March 2008, Booz & Company’s CEO Shumeet Banerji, senior adviser Lord Andrew Turnbull, and Alexis Cleveland, Director General of Transformational Government in the Cabinet Office, hosted a series of four seminars which involved more than 150 public and private sector participants, to discuss what is being done, and what needs to be done, to address ageing in the UK.
Five key themes emerged from the series that require heightened awareness, dialogue and urgent action:
1. Financial education. A lot of work is needed to improve public understanding of the prospects for retirement, with more accurate estimations and updates of life expectancy, the probability and cost of needing long-term care; and realistic estimations of pension support.
2. Long-term care. Previous thinking has envisaged that the state not only takes responsibility for funding the care of an increased number of elderly people but also provides a less rigorous means testing. However, this is unrealistic and it is likely that some form of insurance will be needed—with some kind of state backing, if not actually provided by the state. The key would be to bring as many people into the risk pool, though it is likely that people at the start of their working careers would see a risk they would face 50 years later as too remote. The focus should therefore be on those approaching retirement, or just past it.
3. World of work. The ‘early retirement’ culture of the past 30 years is no longer appropriate. Organisations need to rethink the model whereby power and reward pass from one generation to another. Solutions need to be found to allow senior people to pass on authority without being cast out of the organisation. Also, the UK will need to decide whether to retain its default retirement age of 65.
4. Families. The dominant image is of the three-generational family, but the four-generational family will grow in importance. This will put pressure on women in particular as they are expected to provide informal care upwards and downwards. The provision of long-term care may have to rely less heavily on unpaid and informal care.
5. Marketing of goods & services. Despite the over-fifties spending about £200 billion a year and controlling around 75% of financial wealth, many companies still regard them as a peripheral market. More sophisticated approaches are needed, such as marketing around occasions and special events rather than by simple segmentation by age.