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Maximising the potential of the UK's ageing population. Lessons from Asia and the rest of the world


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On Wednesday, 20th April 2016, the International Longevity Centre - UK and the Global Aging Institute hosted a roundtable discussion in the House of Lords on how the UK can maximise the potential of its ageing population, supported by Prudential Plc.

The discussion focused on a range of topics emerging from the Global Aging Institute's research in East Asia, including how different Asian countries address productivity challenges, changing dependency ratios, gender disparities and the changing nature of intergenerational dependence.

These topics were also considered in relation to ageing societies across Europe, at a roundtable discussion with European Commissioners held in Brussels on Thursday, 21st April 2016.

Published in: Economy & Finance
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Maximising the potential of the UK's ageing population. Lessons from Asia and the rest of the world

  1. 1. 1 Maximising the potential of the UK’s ageing population. Lessons from Asia and the rest of the world. International Longevity Centre and Global Aging Institute lunch supported by Prudential plc April 2016
  2. 2. Attendees • Richard Jackson, Global Aging Institute • Baroness Sally Greengross, ILC-UK / House of Lords • David Sinclair, ILC-UK • Torsten Bell, Resolution Foundation • Ken Bluestone, Age International • Yvonne Braun, ABI • Nick Chadwick, Hymans Robertson • Helen Dimmock, DWP • Lord Filkin, The Centre for Ageing Better 2 • Carol Jagger, Newcastle University • Geraint Johnes, Work Foundation • Nigel Keohane, Social Market Foundation (SMF) • Vivienne Man, FCA • Stuart Tragheim, Equiniti • Lord Willetts, Resolution Foundation • Tom Terry, Global Aging Institute • Kevin Bowman, Prudential plc • Miles Celic, Prudential plc • Tim Fassam, Prudential UK • Tom Denney, Blue Rubicon
  3. 3. Opening remarks • “Citizens almost everywhere in East Asia are highly concerned about their retirement security in the future.” • “In East Asia the retirement system is under stress, with questions still to be answered about who is responsible for funding care in older age.” • “Across Asia, the traditional role of the family is receding. The latest GAI report finds a widespread desire to shrink it further.” • “Although today’s workers in East Asia’s high-income countries are much better covered by state pension systems than they were during their working years, the benefits that most can expect to receive will only replace a small share of their pre-retirement income.” • “Across East Asia there is widespread support for constructive retirement reforms, including increases in taxation and the state retirement age. “ • “Early mandatory retirement ages that are enforced in most countries surveyed are becoming a ‘costly anachronism’ – employees across East Asia need to be encouraged to remain productive in the economy for longer. “ 3
  4. 4. Roundtable discussion – Thematic review The debate covered a wide range of topics emerging from the GAI research in East Asia. These included: • An ageing workforce and the productivity challenge. Topics discussed included the impact demographic change will have on the productivity of the workforce and the ability of current generations to pay for their future old age. The ability of labour markets to adapt to the needs and abilities of an ageing population is an urgent priority. • The capability of immigration to alleviate the problem of an ageing population. Themes for discussion included the different approaches taken by countries to redress the issue of an ageing population. In Japan, the approach is driving towards the greater use of autonomous technology and robotics in the economy. • Gender disparities in the ageing society. The roundtable considered a discussion about how income and employment disparities grow between men and women as they move closer to retirement age. This has implications not only for welfare expenditure but also the informal economy that many older people are engaged in, such as caring for relatives (older and younger) and volunteering. • Birth rates and the “old-age dependency ratio”. This issue Included a discussion about the global impact (both economically and geopolitically) of the changing ratio of old people to those of working age. 4
  5. 5. Roundtable discussion – Thematic review • The changing nature of intergenerational dependence. The key issues for discussion included the societal and policy implications of greater intergenerational dependency in the future. This will likely see an increase in ‘under pressure retirees’, those that are struggling to balance the needs of younger family members with their own retirement planning, ‘the skipped generation’, which sees older people running down their assets to pay for the needs of their grandchildren rather than children, and ‘in- betweeners’ caring for an elderly parent and providing childcare. • The role of financial services. Topics discussed at the event included how best the financial services sector can adapt to trends that will see the number of workers who expect to receive income in retirement from insurance and annuity products grow rapidly. 5
  6. 6. Roundtable discussion – Key points Productivity • “Having studied the issue of productivity in the UK, it appears to me that the greatest possible gains would be made if we were able to shift the high levels of productivity from the 50-65 group further up the age range, perhaps to 70 and beyond. If we could make that shift, through a combination of government incentives for people to remain in work and better and more flexible employment practices, that would make a huge difference to retirement challenges.” • “The relationship between ageing and the productivity of an economy is an interesting one. At the ILC, we have been investigating what’s going on in Eastern Europe and there we are seeing a rapidly developing problem as younger workers leave their home countries to work and be productive elsewhere”. Societal challenges • “It seems to me that across the world, not just in East Asia but in Europe too, there is work to be done to challenge negative messages in society about the capabilities of older people to continue to be productive in the workforce. There is great ‘informal’ economic value driven by older people, whether that is in providing childcare or supporting charities and the third sector. Until we have a better understanding of that economy then we will struggle to best integrate older people into our 6
  7. 7. Roundtable discussion – Key points Societal challenges (cont.) • “We undertook a piece of research with Prudential earlier this year to investigate how the shape of the extended family has evolved over time, and how the intergenerational family may alter in the future. That report suggested that older people have to strike a tricky balance between their later retirement ages, frail living relatives and demands on them as grandparental carers. We also found evidence that it is increasingly common to find intergenerational families co-residing, and the impact that may have on society and government policy.” Labour markets • “It seems to be unlikely that a country will be faced with such a stark choice (between encouraging more migration or increasing their birth rate). All the data suggests that there is actually a positive correlation between countries with higher levels of migration and those with increased birth rates, which would suggest that for most it will be a question of both options or none at all. Flexible labour markets, that encourage women into the workplace and empower them, actually see increases in their birth rates too. It is interesting to see the choices that countries like Japan have made in response to demographic challenges, that is to say an outright rejection on greater migration from abroad. Instead, they are pinning most of their hopes on robotics to be able to complete the jobs of the future and look after their populations in old age.” 7
  8. 8. Roundtable discussion – Key points Financial services • “The demographic challenges pose unique questions for financial services institutions and regulators. In the future, is it possible that we will be looking at having to introduce a universal service obligation on financial services products for the elderly? At the moment we don’t have any obligations to deliver specific financial services products for different age groups.” • “In the aftermath of the financial crisis I think you would struggle to find an economist or politician that will be calling for consumers to save more at the moment. In the short term, stimulating the economy is key. If we genuinely want to make tracks to encourage saving we need to look at the rates of return for savings.” Government policymaking • “We have an increasingly positive picture of economic activity among the 50-64 age group, however it is worth noting a significant gender disparity (10% fewer economically active women than men). From a welfare spending perspective, the prize for solving the challenge in the 50-64 age group is vast – 44% of all ESA claimants are aged between 50-64.” 8
  9. 9. Roundtable discussion – Key points Government policymaking (Cont.) • “The GAI work is interesting but I wonder if there is any country that has really succeeded in making a good fist of ‘joined up’ policy making to tackle the challenge of an ageing population? It seems to me that the picture is not joined up in the UK but equally I struggle to see anywhere else in the world that could be considered a model that we want to follow. Much of our policymaking focus seems to be on those people aged 65+, when really we need to be focusing on those in the 50-65 bracket that are at their most productive but also considering their retirement.” Geopolitical considerations • “What do you think might be the global, macro-impacts of these changes in demography. It’s been suggested that the recent direction of foreign policy from both China and Russia can be traced, in some ways, back to their own domestic economic problems, including ageing societies. For the US, on the other hand, will they become even more dominant on the global stage in the future?” 9
  10. 10. Conclusions • “When it comes to retirement, East Asia finds itself at a crossroads, much like the rest of the Western world.” • “A key feature of East Asia’s state pension systems that undermines their adequacy is the widespread practice of allowing retirees to receive lump-sum payments rather than regular monthly benefits. The GAI research suggests that most workers would rather receive a monthly income, and national governments need to adapt and respond to this change.” • “Across East Asia, there is widespread public recognition and support for government policies to adapt to the demographic pressures… As just one example, in western countries, proposals to raise the retirement age are typically met with widespread opposition. The public in most East Asian countries has a markedly different view.” • “As educational attainment continues to grow across the region, there is an increased desire for sophisticated financial advice and products…To capitalise, further work needs to be done across East Asia to educate the public about the role that financial services companies can play in supporting individuals plan for their retirement.” • “The moment to engage the challenge is now, while the public is ready to embrace constructive reform on so many fronts. If countries delay until their age waves roll in, the challenge will only become more 10