‘What is the greatest economic risk facing the world today?’
This question has been one of many posed in recent investment seminars I have attended. The question elicits comments spanning trade between the US and China, geopolitics, Brexit and even climate change. These are all vitally important to the future of the world as we see it. Alongside these, I propose we include ‘longevity’.
Centenarian data
The Royal Central website in 2025 mentions it was King George V who first sent a message to a British national on their 100th birthday in 1917. British centennials now expect to receive a message from the King on their 100th birthday, 105th and every year thereafter. In September 2014, The Daily Telegraph published an article on the ‘centenarian team’. This is a Whitehall Office who make sure centenarians receive a birthday card from the Monarch. The ‘Centenarian Team’ are now seven people strong- an increase from a single person only ten years ago.*
The Office of National Statistics (ONS) confirmed in 2023 there were 16,140 centenarians in the UK. Life expectancies have risen consistently with each generation expecting to live longer than their parents. This trend was refuted in a few articles in 2018, but the long-term trend is clear. The world is getting older.
Financial outlook
An older population needs to support itself for longer. To explain it is best to consider yourself retiring (as most people I speak with intend to) at 65 years of age. If your life expectancy extends to 100 then you will most likely be retired for one year for each year you have worked. This just isn’t feasible. A useful metric to consider when it comes to feasibility of retiring at 65, is the Old Age Dependency Ratio (OADR).
This is the proportion of people aged 65 or older per 1,000 people aged 16 to 64. In 2016 the proportion was 285 per 1,000 and it is expected to shift upwards to over 450 per 1,000 within 30 years. This leads us to question the sustainability of pensions to fund retirement. The UK was forecasted to have spent around GBP125 billion on the State Pension in the 2023- 24 UK tax year compared to circa GBP16 billion in 1986. To put this into context, this represents around 42% of total welfare spend in the UK by the Government.**
Pension benefit spending (which includes the State Pension, Pensioner Housing Benefit and Pension Credit) equated to around 5.1% of GDP in the same tax year.**
It is a fair assumption I believe to see this as a growing problem with demand increasing, as more individuals reach the State Pension age and the value of the payments increase. I would question how long this level of spend can be sustained by the UK Government.
‘Pre-retirees’
A number of individuals amongst the older generation are actively choosing to work past the age of 65 in the US and throughout Europe. Working longer delays the need to draw capital from investments and pensions to fund retirement and the option of semi-retirement should be considered. ‘Pre-retirees’ has emerged in recent years in financial publications to describe this older working generation.
The age of 65 as a retirement point is often discussed but appears to have little merit as people are much more active into their later years. Examples such as Warren Buffet (94 years of age and only recently announcing a succession strategy for Berkshire Hathaway) to Fauja Singh who sadly passed away in July this year at 114 years of age and who completed his last marathon in 2013 at the age of 102.***
A longer future to prepare for
While naturally the notion of living a lengthy, prosperous and healthy life is positive, there is no simple answer to the question of building a sufficient base of capital to fund a longer period of retirement.
We may assume a longer life will equate to a longer period of retirement. To fund a longer retirement should you consider extending your working life, reducing spending expectations in retirement or making your capital work harder for you?
Our lifestyles and work habits are in the process of undergoing substantive transformations, and this will continue in the years and decades ahead. In ‘The 100 Year Life’ (Gratton and Scott, 2021) the amusing terms “owls” (Older and Working Less) and “not yet past its” are used to describe the extension of the working life.
A change in our approach to retirement is essential if we hope to create meaningful and lasting lives for ourselves—both individually and collectively as a society.
Alongside this, having a flexible asset base which you can draw from without being penalised is important. Allocating capital to investments which have limited flexibility can be an issue and of course exit penalties should be avoided if they represent an impediment to you being able to access capital as and when required.
Working with a financial planner earlier in life can help you prepare you for a longer future, with sound advice, cashflow modelling alongside dynamic and forward thinking.
There are benefits to saving earlier if you have the means to, but sometimes this isn’t the case and making more of your capital at a later stage in your career requires even more consideration. After all, on the basis of probabilities, a longer retirement hopefully awaits us.
For help with planning ahead for retirement in a changing world, please contact us.
* Source: gov.co.uk
** Source: Office for Budget Responsibility
*** Source: BBC News
Ashley Jones is a Financial Planner based in Singapore:
Progeny (SG) Pte. Ltd. (company no: 201506546H) is registered in Singapore. It is authorised to act as a financial adviser by the Monetary Authority of Singapore (MAS) under licence no FA100057. Registered office: 6 Battery Road #16-04/05, Singapore 049909. Telephone No: + (65) 6225 0825 Email: [email protected] Website: https://theprogenygroup.com/en-sg/
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