The silver tsunami: supporting the ageing population

My 98-year-old grandmother lives in palliative care in a private facility. Her accommodation, along with medicine and consultations with specialists and therapists, is financed by my father, who is recently retired and draws the funds from his superannuation. Yet, as my grandmother continues to age, the cost of her care increases exponentially while my father’s superannuation shrinks. If and when the day comes that he can no longer afford it, the responsibility of paying for my grandmother’s care will fall onto me. And if my father lives as long as my grandmother, I might have to meet the cost of his palliative care too, at the expense, potentially, of my children’s college funds. 

It’s a pessimistic scenario. But it paints a human face on the massive financial burden many of us will have to face as a result of the rapidly ageing population. According to the UN economic division’s most recent ‘World Population Ageing’ report, the older generation is “poised to become one of the most significant social transformations of the twenty-first century, with implications for nearly all sectors of society, including labour and financial markets, the demand for goods and services, housing, transport and social protection.”

So how fast are we ageing? Between now and 2030, the number of people in the world aged 60 years or over will grow more than 50%, from 901 million to 1.4 billion. By 2050, the number will hit 2.1 billion. Latin America and the Caribbean will be worse hit, with a 71-per-cent increase in the population aged 60 years or over within the next 13 years. Europe will be least affected, with only a 23-per-cent increase. Oceania sits at the middle with a projected 47-per-cent increase.  

In Australia, the number of people who are 65 and can qualify for the age pension has grown from 1 million people 50 years ago (about 8% of the population) to 3.6 million today (15% of the population). On the present trajectory, 1 in 4 Australians will be eligible to apply for the age pension in 2050. 

Therefore the question begs: if the pool of taxpayers keeps on shrinking, who the hell is going to pay for all those pensions?

The older generation is “poised to become one of the most significant social transformation of the 21st century

Balancing the budget

Future generations — that’s who. But now they finally have some relief in sight. Over the past 12 months, Australia’s Department of Health announced the first in a series of painful but necessary cuts to aged care and health programs to mitigate “much higher than anticipated growth in funding claims,” and establish “a more sustainable” model. The controversial cuts amount to a sizeable $2.5 billion over the next 4 years — a decrease of 11% in spending per resident. UnitingCare Australia called the cuts “arbitrary”, saying they would have a “devastating impact” on the care of frail and older people in Australia. Another major aged care provider, Amana Living in Perth, warned that the cuts would simply “increase the burden on an already overstretched hospital system.” 

Public-policy think tank the Grattan Institute believes there are less painful solutions the government could have tried first. In a report released in November 2016, it stated that $1 billion a year could be saved by winding back unduly generous tax breaks for older Australians. “The rise of the ‘taxed-nots’ is in part due to age-based tax breaks,” the report said, pointing out that “age tax breaks for seniors are a relatively new invention — not provided to previous generations.”  

An even simpler solution yet is to increase the size of the taxpayer pool relative to the number of pensioners. But to do that, we need to forgo the economic assumption held since the end of WWII that we can retire on a government pension at age 65 as a fair reward for all the tax we’ve paid over the years. The thing is, when that assumption was made, the average life expectancy in Australia was around 60 and few people were expected to live long enough to draw the pension. Today, life expectancy in Australia is 80 plus and 1 in 3 Australians born in 2017 will live past 100.

In its wisdom, the coalition plans to raise the minimum age of retirement from 65 to 67 by 2023. But according to former editor-in-chief of The Economist Bill Emmott, it’s not enough. Seventy, he says, would be a better number, or better yet, index the pensionable age to life expectancy. So far only one country, Denmark, has taken that dive. “In the meantime,” Bill warns on his website, “Western welfare states will remain financially unviable, economically sickly, and politically strained.”

The grey dollar

The metaphor of the silver tsunami is rich with apocalyptic imagery. Yet it’s also flush with cash. Take my grandmother, for example. Whenever I visit her, I go in an Uber. I often stop off at the ice creamery around the corner and buy my grandmother her favourite coffee ice cream. And I’m not the only one in the family who indulges her. Trips with Uber and sales of ice cream to family and friends who visit my grandmother are the tip of the iceberg of the grey dollar — a raft of everyday economic opportunities and untapped markets underpinned by the new demographics of an ageing population. 

The healthcare, insurance and pharmaceutical sectors are obvious beneficiaries, though financial services and property are where the real silver dollars lie. According to the Grattan Institute, over 55s control 58% of the total wealth in Australia — wealth that came from housing, or, more specifically, from the huge increase in the price of property in the country, the latter having grown in real terms by a whopping 121% over the past 20 years. 

And contrary to stereotypes, older people are more spendthrift with their money too. Australia’s ‘grey nomads’ cough up to $160,000 for top-of-the-range Winnebago RVs, plus boats, kayaks, camping equipment and bicycles before heading out on self-drive holidays across the country for months and years at a time. As a result, they’re keeping hundreds of towns in parts of regional and remote Australia afloat. “Aged care, hip and knee replacement, and succession-planning would be good businesses to be in, and travel such as Rhine River cruises,” says Bernard Salt, a futurist who uses demographics to interpret how business might change. “Any business attached to servicing those surging demographics must do well in business.”