International Longevity Centre - UK

Today’s column by Philip Stephens in the Financial Times (Tomorrow belongs to someone else) pinpoints a fascinating scenario that is dawning on policymakers and researchers: that the children of baby-boomers cannot expect a relative level of financial security as high as their parents. 

This is important because what is under threat is an underlying assumption of society about what each generation passes on to the next, and about the entire nature of ‘progress’ in society.  This needs some explanation. As technological change and globalisation continue to evolve, each successive cohort of the young have access to choices, labour-saving devices, luxury goods and holidays far beyond what their parents experienced. That is not in question.

However, stripping out inflation, will the children of the baby-boomers amass a pot of assets as large as their parents? House price inflation and defined-benefit pensions have combined to make the post-war cohort very well-off. Will their children achieve the same level of security?  Probably not. The inflation that paid off the mortgages of the baby-boomers seems unlikely to return, now that independent central banks have taken to targeting inflation so determinedly. And the generous pension plans that increasingly seem like some strange historical aberration will be replaced by much meaner schemes for today’s young.

The question, which Stephens fails to touch on, is what will happen to that wealth accumulated by the baby-boomers? Will it be used to meet their long-term care costs? Will it be redistributed by a capital gains tax on homes? Or will it be left to pass down within families as gifts and inheritance, entrenching inequalities. These are the vital questions for Government and the financial industry, and they provide an urgent research agenda that the ILC-UK will pursue.

Dr Alexandre Kalache, Director of Ageing and the Life Course at the WHO addressed an audience at Kings College this week, on the topic of ‘The Challenge of Population Ageing is Global- but Greater in the South’. The daily work of the ILC-UK is mainly focused on the UK, so this was a refreshing chance to take a global perspective on the phenomenon of ageing.
 
It is commonly known that in countries such as Japan, Germany and Italy, by 2025 about a third or more of the populations in these countries will be over 60. What is less well known is the rapid growth and importance of population aging in less developed countries. Currently more that 70% of older people live in the global ‘south’ and this is projected to increase to more than 80% by 2025. Developing countries face significant challenges because of their growing older population. Dr Kalache pointed out that compared to the developed world, the socioeconomic development in developing countries has often not kept pace with growth in ageing. For example, while it took 115 years for the proportion of older people in France to double from 7% to 14% it has taken only a generation or a little more in southern countries such as Brazil. In most developed countries, population aging was a gradual process following steady socio-economic growth over several decades while in developing countries this has been significantly compressed. As Dr Kalache put it: “developing countries are becoming old before they become rich while developed countries became rich before they became old.”  Thus, developing countries will face significantly more socioeconomic challenges associated with ageing populations than countries in the ‘North’.
 
Another difference is that ageing in developing countries ‘feminized’. While in the North women tend to live longer than men, in countries such as Sierra Leone and India, men and women have about the same life expectancy; this being indicative of the deprivation of opportunities for girls, such as education.
 
Dr Kalache argued that while some people viewed aging as a problem, it was not; it was a challenge and one that we could meet.  He stressed that a healthy older person is valuable resource: a resource to the family, to the community and to society in general. We should therefore aim to encourage and support healthy and positive ageing. 

Primrose Musingarimi