From an ageing society to a longevity society

The prevailing narrative in the so-called ‘ageing crisis’ has been one linked to overburdened pension systems, a shrinking workforce and declining birth rates. Yet, there is a new paradigm emerging, not of decline, but of opportunity. The focus is shifting from mere life expectancy to healthy life expectancy, emphasising prolonged engagement in work, society, and the economy.

In the following summary based on a recent UK client event session titled ‘Investment’s problem with longevity’, Nic Palmarini, National Innovation Centre for Ageing (NICA), discusses the implication of longevity on the financial sector. The event was held in May at the Raffles London at The Old War Office, attracting about 125 executives from 95 companies, including insurers, consultants, institutional investors, family offices, and wealth advisers.

Shifting the collective mindset from an ageing society to a longevity society ultimately centres on time – specifically, how much more of it individuals have after they retire and how they would like to spend it. To put this into context, we turn to Otto von Bismarck’s 19th-century model of pension systems. The assumption then was that retirement would encompass about three or four years in the final stages of life, not the final third of it as is typically the case in the developed world.

Yet in most cases, retirement is still tethered to chronological age and not functional capacity. It does not reflect what we now know about ageing, which is that it is not a fixed process. It is malleable. Supported with the right policies, technological advances, and personal choices, individuals can stay healthier for longer. Across the world, there is increasing evidence that it is possible to extend not just life, but a good life. Therefore, financial tools also need to progress to incentivise not just life expectancy but healthy life expectancy.

Longer lives can mean creating more value – not just for people but also for markets.

The difference is where the opportunity lies. For example, in the UK, average life expectancy is about 81 years, though healthy life expectancy is less at about 72 years. That is nearly a decade of life spent in poor health, which can be expensive for the healthcare system, for employers and for families. However, simply increasing employment by 1% among people aged 50-64 in the UK could boost gross domestic product (GDP) growth by 5.7%. And adding one year of healthy life to prolong the working lives for those in the same age group not only collectively improves quality of life but also potentially increases the UK’s GDP by about GBP16 billion.

Creating incentives for people to stay healthier not only strengthens the workforce and reduces healthcare costs, but also contributes to a critical part of the economy that supports longevity. By 2040, about 63 pence of every pound spent will come from those over 60 years old in the UK alone. Globally, older consumers already account for more than half of global consumption growth in urban areas and are estimated to control about US$22 trillion in spending power by 2030.

Therefore, companies that cater to the longevity economy will need to innovate to stay competitive. For example, products and services may include those that support second careers, lifelong learning, ways of preventing loneliness, multi-stage retirement and residential housing that fosters a sense of community.

Traditional pension planning models are increasingly proving inadequate for the changing ways that people choose to retire.

According to a recent survey from Fidelity International and Crisil Coalition Greenwich, 40% of the respondents from the financial sector highlighted a lack of preparedness for their clients living longer. The survey, conducted between October and November of 2024, included about 125 institutional investors and intermediary distributors in Europe and Asia.

Traditional pension planning models are increasingly proving inadequate for the changing ways that people choose to retire, with multiple careers, varied personal goals and extended family responsibilities. Therefore, the financial toolkit should also evolve to include the following considerations:

• Portfolios with longevity in mind. Strategies that manage risks and opportunities should account for a longer life span.
• Products that support financial flexibility. Investors may choose to retire, come out of retirement, start a new business, or financially support their children and grandchildren.
• Strategies to help investors navigate uncertainty. A deterioration in health, increasing caregiving needs and housing transitions may result in unexpected requirements for cash flows.
• Financial advice catering to investors’ financial goals as well as their personal values. Retirees have multiple goals that may include legacy, purpose and community. Financial professionals should be positioned to support clients in reaching their financial as well as non-financial outcomes.

Longer lives can mean creating more value – not just for people but also for markets. Finance has a critical role to play in the evolution from an ageing society to a longevity society. The transition would change how we redefine retirement, how we value health, and how we manage finance over much longer lives.