Age UK's Charity Director General, Michelle Mitchell's presentation at the Agenda for Later Life Conference 2012 www.ageuk.org.uk/afll

1. The Economics of Ageing
Michelle Mitchell
Charity Director General
Age UK
8 March 2012

2. The fiscal challenge
• Demographic change, costs of health and
care, costs of social security
• OBR: public spending to rise from 36.3% to
41.7% of GDP between 2015 and 2060
– Age-related public spending to rise by
2.3% in relation to GDP between 2015 -
2030

3. Some perspective
The fiscal challenge we face in 2015 because of ageing will be one-third the size
of the current deficit reduction targets, with three times as long to phase in
changes
The OBR uses a number of assumptions about ageing:
• Increases in cost of healthcare are assumed to be the result of ageing.
However
– this may be affected, for example, by individual life choices and medical
advances
– recent research shows impact of ageing is far outweighed by other factors
such as growth of technology.
• The numbers of people working in later in life will affect the ‘dependency
ratio’
– Analysis conducted by the National Institute of Economic and Social
Research (NIESR) suggests that no early retirement would have boosted
UK GDP by around 1 per cent (£14 billion) in 2009

4. Debate must be seen as opportunity
A new concordance between generations – reframing the debate
• We’re all in the same boat
• Successive generations benefit from increasing life expectancy
Life expectancy at birth: 1948 1951 2010 2031 2051
Men 65.78 65.56 77.7 82 85
Women 70.09 70.41 81.9 86 88
Life expectancy at age 65: 1951 2011 2031 2051
Men 12.1 21.6 22 (87) 23 (88)
Women 15.5 24 24 (89) 25 (90)

5. Economic contribution of older people
Grey market in UK: £109 billion in 2010
Older people: £5,154 per year in taxes
WRVS calculated that over 65s currently benefit the economy
to a total of £175.9bn. This includes delivering social care
worth £34bn and volunteering worth at least £10bn. This
compares to welfare costs of £136.3bn
2.8m people aged 50 and over provide unpaid care which has
been estimated to contribute £50bn in unpaid family care

6. There are huge wealth inequalities across the
generations
Total household wealth including pensions by Age Group
Great Britain 2006/08
85+
75-84
65-74
10th Median 90th
55-64
Age Group
45-54
35-44
25-34
16-24
0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000
Average Household Wealth (£)

7. Age UK Silver RPI shows falling real incomes of older
cohorts during the current economic crisis
Inflation and Older People
Change in Headline RPI and Silver RPI
January 2008 - September 2011
20%
18%
16%
3.58 4.49 5.28 5.68 5.40
14%
12%
(%)
10%
8%
6%
4%
2%
0%
55-59 60-64 65-69 70-74 75+ Headline
RPI

8. Individual and the state need to do more…
OECD: UK spent 6.6% of GDP in 2007 on
pensions, rising to just 8.1% by 2050.
– Germany spent 10.4% of GDP on pensions in
2007 and is forecast to spend 12.3% by 2050
– Average for the whole OECD is 11.4% by
2050
UK state pension spending is low in comparison
with OECD countries
Only 38% of people of working age contribute to a
non-state pension

9. People who can must be prepared to
work longer and save more
State must provide more support
Employment rate 50 – 64: 65%
People 50 – 64 who are ‘workless’: 1 million
More must be done to encourage pension saving
throughout the life course
– Pensions auto enrolment the beginning

10. Those who can afford it should be prepared
to use their assets in later life
Contribute to costs of care (Dilnot proposals)

11. Leadership from Government
Avoid stereotypes and the smoke and mirrors tactic of
intergenerational conflict
– Educating the public about what it means to be an ageing society
– Challenge notion that people contribute during their working life then become a
burden once they retire
Focus on creating the support and opportunities, for example to
update skills, maintain health and work longer
Reform of social care system to fairly balance contributions between
the state and individuals
Further incentives to save and plan for later life