A report by the International Longevity Centre has warned that average pensioner incomes will start falling as more people retire with a less generous state pension and without the benefit of final salary pensions.
The report, ‘Tomorrow’s World: The Future of Ageing in the UK’ describes the future challenges and opportunities posed by an ageing population.
While the report does not explicitly point to the insurance industry to provide solutions to the challenges, its conclusions are likely to encourage players in the UK protection industry to consider the opportunities an ageing society means for insurers and whether the insurance industry can do more to provide tailored solutions to this major issue.
The ILC-UK argues that society is not adequately responding to ageing today: For example, it says the social care system is crumbling and health care is failing to incentivise the prevention of ill health.
It also argues Individuals are currently underestimating their life expectancy and risking running out of money in retirement.
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If urgent action is not taken to address the challenges posed by population ageing, ILC-UK presents a future in which health expenditure has increased debt as a proportion of GDP to 180%; more than 1m additional care workers are required to meet the demand for social care; and millions have failed to save enough ahead of retirement.
Commenting on the report, Emma McWilliam from Hymans Robertson LLP said the Government’s role in retirement should be to provide certainty through the flat rate state pension and act as an insurer of last resort for long-term care needs.
McWilliam said: "To ensure those roles can be performed in a sustainable way, it’s vital that individuals are clear about how much money they will have in retirement, how far off track they might be and what they need to do to get back on track. Talking about the ‘savings gap’ in general terms doesn’t resonate with individuals.
"They need to know how they will personally be affected. Technology is making that easier, and the government should pave the way to make that technology more readily available to greater numbers of people."