26 October 2007
An ageing population presents a series of issues that must be addressed now, if millions of people are to have a decent old age. Rebecca George looks at the challenges ahead
The UK population is living longer. 'Great', you might think. Plenty more time to pursue that retirement cruise around the world, blow the children's inheritance on a small yacht, or just bask in the knowledge that, compared with your parents and grandparents, you will spend a larger proportion of your lifetime free from the daily grind of work.
Over the past 35 years, the number of people over 65 has grown by 31%, from 7.4 to 9.7 million. Somebody leaving work today can expect to spend a third of their life in retirement.
This trend is expected to accelerate: one in five children born today will live to be 100 or more, and the proportion of us who will make it to over 85 will more than double in the next 30 years. Although around 350,000 more individuals now arrive in the UK every year than leave, even this influx of labour is not predicted to head off our ageing population problems.
For government and society as a whole, these figures present some major strategic and long-term challenges that must be confronted sooner rather than later to avoid unsustainable increases in public spending.
Well-documented questions on pension reform, benefits and retirement age dominate the issue, the root cause of which – low fertility rates – is not something the government can easily influence. But administrations of any colour must avoid deferring difficult, but necessary reforms to head off vastly inflated public spending 20, 30, 40 years hence.
Apart from the pressure on pensions and benefits outlay, there are a series of practical challenges unique to the British situation, which are part of a wider programme of development and regeneration that the government is rolling out over the next ten years.
Foremost among these is housing and access to neighbourhood services. The government has ambitious plans to meet our housing requirements for the next generation, but the ageing population dimension needs to be adequately considered, too.
At the heart of this issue is the one thing that older people say they want more than any other: to preserve independence in their own homes. To do this, communities and housing itself will need to be explicitly 'future-proofed' for this purpose. Could a primary school built today be designed to transform into a community health centre in 2030?
Key services of care and inclusive transport links (more than two-thirds of single-pensioner households have no access to a car) will need to be integrated into communities. Housing will have to be modern, warm, clean and safe – and adequately accommodate people with limited mobility or particular requirements.
This vision sits neatly with the government's commitment to personalising services, but less clear is the extent to which local planning authorities are embedding this into their work. There are good arguments to adapt the existing housing stock to make it more suitable for its occupants in the coming years.
More than half of women aged 75 and over currently live alone, and in some such cases modifications to housing could offset the risks of traumatic (and expensive) events such as falls, cold-related illnesses, or mental health problems arising from loneliness or social exclusion. This applies particularly where low incomes make the necessary investment difficult to sustain.
Financial exclusion is another issue that older people say they want more help with. The presumption that all older people draw on assets squirrelled away over a lifetime is not always supported by the facts: around 2 million pensioners live below the official poverty line, with numbers expected to increase.
The government's minimum income guarantee scheme is designed to create a safety net to ensure that all pensioners who do not receive enough funds from standard state benefits or private means receive top-ups to create a baseline standard of income.
But 96% of older people say they want more help with managing their money in the face of technological changes and Post Office and bank closures.
Charities routinely make the case for high-street banks to establish older people's advisory groups to review the accessibility of key services.
Sixty per cent of pensioners prefer to use cash to pay for goods and services, and only a third feel comfortable using cash machines. Forty-five per cent of older people find it difficult to remember Pin numbers.
Clearly, then, there are opportunities for the private and voluntary sector to provide tailored advice on how to manage finances to avoid poor living standards wherever possible. The financial services industry has traditionally shied away from socioeconomic groups that are deemed to be unprofitable, but in partnership with government and charity groups, opportunities exist to give older people better advice, information and access to financial products and services.
The cost savings and customer service benefits of online service delivery are well documented, but until the technology-savvy generation reaches old age there will be a continuing demand for physical offices and branches that are easily accessible.
Preparing for changing circumstances is a key component of financial management in later life. Most of us do not consider the possibility that we will one day become reliant on other people to cook a meal or use the toilet. Yet the number of people in care homes is set to rise by 63% by 2031, with women over 85 twice as likely as men to live in such circumstances.
Forty per cent of us who reach 80 or over will experience a long-term illness or disability. One in three of us will acquire some form of cancer and, despite the growth of the private care market, long-term care costs are set to treble in the next 40 years. In addition, 5.2 million of us provide voluntary care to someone else.
Younger generations need to start thinking about their own futures, and put financial arrangements in place through insurance schemes or pensions and investments to preserve their quality of life later on.
Again, there are opportunities for government to collaborate with third and voluntary sectors to provide the optimum level of services – to provide information so that people can make informed choices and to build inclusive communities where intervention is rendered unnecessary by effective prevention.
Perhaps the saddest element of this issue is that of all demographic groups, the older generation has the lowest expectations about quality of life and what they can receive from government services. In a crowded policy agenda, ageing population issues are easily sidestepped when more immediate problems such as crime, health or education require attention.
Quietly announced in this year's Comprehensive Spending Review was a clear signal from the government that it intends to reform the means-tested system for social and long-term care with one 'that shares costs between the individual and the state'. This is a significant step and could be an indication of the government's wider acceptance of the size of the problem.
Finally, we should be clear about who we're doing this for: in preparing for an ageing population, middle and younger generations are not actually helping the people who are old now, but future older generations. We're planning, in fact, for ourselves.
Rebecca George is a partner at Deloitte. Public Finance and Deloitte are hosting a round-table debate on paying for the costs of ageing on Monday, October 29, in central London.
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