Ageing – a 21st-century threat
Perhaps the most important question you can ask yourself today is 'how prepared financially am I for the future?'
It is well documented that a worrying majority of working-age people in the UK have vastly inadequate provision in place for their retirement – a situation that can only worsen as we continue to live longer.
The 2013 House of Lords Committee Report by the Public Service and Demographic Change Committee argued that "Government and our society are woefully underprepared" for ageing. They pointed out that while longer lives are a success story, the failure to address ageing could result in "a series of miserable crises". It's a growing issue that we all need to consider going forward.
Right now, there are more over 60s than under 18s. And in the next 30 years, the population aged over 75 in the UK is expected to double. It means in the next 20 years or so, 1 in 12 people will be over 80 and nearly 1 in 4 will be over 65. Essentially, an ever smaller working-age population will need to support older generations in terms of health, social care and pensions.
If you add the recent global debt crisis and historically low investment yields to our vastly improved life expectancy - one of the greatest triumphs of the last century - this combination of factors looks set to be one of the greatest challenges we will face this century.
Chasing yields in golden years
It is the burgeoning ranks of longer-living retirees who most require stable, quality investment yields. Yet these have become scarce as we continue to work through the unconventional policy measures that central banks have rolled out to combat the continuing aftershocks of the global financial crisis.
Ultra-low interest rates and extraordinary monetary stimulus have driven investors further up the risk spectrum in the hunt for income; government bond yields are now at historic lows – many with negative yields; and UK interest rates continue to return virtually nothing to savers making saving for longer retirements and future generations even more problematic.
And it’s not a problem that’s going away any time soon. After years of bingeing on debt to boost economic growth, the world is now trying to rebalance its revenues against its outgoings – and it is highly likely that growth in years to come will continue to be lower.
But it isn’t just an ageing world and historically low yields that threaten our future economic sustainability. Individuals’ savings levels are simply too low – despite the success of auto-enrolment pensions. Unless we put more by for old age, future generations of retirees will find themselves poorer than today’s pensioners – and, unlike today’s pensioners, they won’t necessarily have the option to sell down their capital to fund their retirement.
Time to grow up
As individuals there's not a lot we can do to solve the world’s economic problems, but there is more we can do to become more financially savvy and take responsibility for our own sustainable economic futures. While most of us know what a mortgage is, too few of us know what an annuity is. Quite simply, we need to better equip people to build their savings, invest their savings then spend their savings.
In 2013, The Alliance, a coalition of eight organisations came together to ensure our society is ready for ageing. Perhaps we should find a way of getting every 45 year old to at least look at the 11-point prescription for successful ageing:
There's no denying it. Our ageing society poses a threat to economic growth, societal prosperity and even our future welfare state. And neither individuals, companies nor governments are preparing adequately for the slow but inevitable change we are witnessing. At least we, as individuals, can do something towards taking responsibility for our own futures even if it’s starting with the simple steps above.
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Thankfully, with careful planning and prioritising, you can help ensure your long-term needs are met – and look forward to a more secure and comfortable later life.
If you’d like to talk about your future with a Canaccord Genuity Wealth Management specialist, just call us on +44 20 7523 4738 or email firstname.lastname@example.org.