Financial Times: Will they still need you, will they still feed you, When you're 64

Norma Cohen

Wednesday November 16th 2004; Retirement Page 1

When historians look back on the 20th century, its defining characteristic may be neither its two cataclysmic world wars nor its explosion of technological innovation. Instead, what is likely to stand out most as the transforming element of the world we live in is the stunning rise in human longevity, particularly that enjoyed at older ages.

"Longevity is the 21st century's ultimate strategic issue," says Richard Jackson, senior fellow in charge of the Global Ageing Initiative at the Washington-based Centre for Strategic and International Studies. "It affects every aspect of social and political life."

In the UK, demographers have discovered what they describe as a "golden cohort" of people born between the two world wars who are living far longer than any previous generation and show signs of going on living longer - and healthier - lives still. Similarly, in Japan, demographers have discovered an even more startling step change in longevity among women born in 1910.

Since 1960, they have added one year of post-50 life expectancy every four years. Before 1960, they had gained a year every 18 years. Gains are not limited to the developed world. Mortality rates in Mexico, for instance, were twice those of the US in 1930. By 2010, they are projected to be roughly similar. Similar trends are reported in Korea and China, with notable standouts limited largely to Russia and sub-Saharan Africa.

That people are living longer is a human triumph. With an industrialised world that upholds the sanctity of human life, such news surely occasions rejoicing. Yet, the rise in the number of older people, and the attendant drop in fertility rates among wealthier nations, is forcing policy makers around the world to take a hard look at how they finance the care of those once deemed too old to be economically productive.

Ros Altmann, a specialist in pensions economics and a governor of the London School of Economics, argues that the challenge is not how to provide care for the elderly but to re-think how people work as they age. "We are not facing a pensions crisis," Ms Altmann says. "What we face is a retirement crisis. Retirement should be a process, rather than an event, a journey rather than a destination.

"Individuals could have a whole new phase of life that previous generations never envisaged; gradual and flexible retirement."

Kevin Wesbroom, a partner at Hewitt Bacon Woodrow, also questions the nature of retirement. "Does it make sense to go from 100 per cent employment on Friday afternoon to 0 per cent employment on Monday morning?," he asks. And too often, retirement forces social irrelevance. "How many times can you knock a little white ball around a green?"

Nevertheless, what has dominated political and economic thinking about the rise in human longevity has largely been concern about its cost. While politicians debate the correct age at which to retire, sociologists and demographers are rethinking the idea of what it means to be old.

"If a 70-year-old has the health of a 65-year-old, we have to think about that person differently," says Kenneth Manton, research director of the Centre for Demographic Studies at Duke University.

Globally, according to the United Nations, the over-80s comprise the fastest growing segment. The world's population aged 60 and over was roughly 600m in 2000, about triple that of 50 years earlier. In the next 50 years, the number is likely to triple again to more than 2bn. In developed countries, the percentage of older people (defined as the over-60s) will rise from the current one-fifth of the population to one-third by 2050.

Actuaries and gerontologists are still unclear why these changes are taking place. In the UK, theories range from a decline in smoking after the 1960s to the use of antibiotics in fighting disease. But one thing is certain. Policy makers and electorates alike are only beginning to grasp what these profound changes may entail.

The most immediate impact of the world's growing elderly population has been felt most forcefully in the social security systems, particularly those in the US and Europe, as wealthy nations suddenly consider the growing proportion of gross domestic product that will have to be devoted to older people.

In the UK, a recent report by the government-appointed Pensions Commission notes that in order to maintain the current level of provision, pension expenditure will have to rise from 9.9 per cent of GDP today to 17.5 per cent by 2050.

This reflects the fact that, while a 65-year old male would have been expected to live for 12.2 years after retirement, he is likely to live 21.7 years in retire-ment by 2050, making the provision of a pension from any source nearly twice as expensive as it was. Of even more immediate concern has been the impact of rising longevity and early retirement on the employer backed occupational pensions system. Once theshowcase for welfare capitalism, these corporate pension plans rode through violent swings in stock markets in the early 21st century that left them with gaping holes in their balance sheets. Estimates of the aggregate deficit of UK pension funds, depending on how you count it, range up to Pounds 300bn.

The US, which had the foresight - unlike the UK - to put an insurance underpin beneath its occupational schemes, now sees the safety net stretched dangerously. A report from the Centre On Federal Financial Institutions ( Coffi) predicts that the safety net could become insolvent by 2020, long before those it insures have passed on. Nor are the US and UK alone. In Germany, 17 per cent of the population was 60 or older in 1960; by the middle of this century, that proportion will be 40 per cent. Already, the rise in longevity has increased the cost of providing the traditional generous state pension by about 30 per cent since 1970.

The political instability that such data can suggest is profound, and already, the subject of debate in Germany. Last year, Philipp Missenfelder, chairman of the youth wing of the centre-right Christian Democrats, unleashed a paroxysm of public anguish when he declared that the nation's shrinking base of younger workers should not shoulder the burden.

"It's about time you 85-year olds started paying for your own hip replacements," Mr Missenfelder was quoted as saying in an interview. Ironically, the greying of industrialised nations appears to be swinging political power away from Mr Missenfelder's generation back to ageing baby boomers. According to data from the AARP, the US group that campaigns on behalf of the over-50s, German voters aged 50 to 70 are now those with the highest turnout - close to 90 per cent - in elections. That trend shows up elsewhere, including the US where a similar turnout is recorded among those of retirement age.

Meanwhile, the inter-generational competition for scarce resources is hardly likely to be limited to pension provision. Healthcare, too, looms as a source of tension. Indeed, it may prove an even more fraught issue since the heart of the debate requires confrontation over how to ration life-extending treatment.

Robert Binstock, professor of ageing, health and society at the School of Medicine at Case Western Reserve University, divides the bioethical debate about healthcare for the elderly into three broad categories; how to ration it, how the costs should be shared between government and individuals and what life-extending measures should be offered to those suffering from senile dementia.

In all of these, money is the elephant in the room and all have the potential to become moral quagmires. "If we single out one group of people as not deserving of life-preserving care, which group is next?" he asks, adding that he opposes rationing. All is not bad news, however. Indeed, medical experts point to the trend known as "the compression of morbidity."

In short, the elderly in many industrial societies are living their golden years much more free of illness than any generation before. Serious illness is increasingly compressed into a few short years at the end of life and studies from the US suggest that healthcare costs for those living into their 80s and 90s may be no greater than those who die a decade younger.

Indeed, among the more troubling issues in an ageing society is not how to pay for pensions and healthcare, but rather, a more mercurial one; how do we integrate into our society the lives of those who can no longer contribute economically to it?

The fierce heat wave which swept Europe in the summer of 2003 illustrates this point. In France, more than 11,000 people died, almost all of them old, alone and forgotten in their apartments. These elderly, whose lives we claim to value enough to provide with pensions and medical care, are doomed without social networks to sustain them as well.

Eric Klinenberg, an assistant professor of sociology at New York University and an expert on heat-related deaths, says that those heat-related deaths were a social stigma on France. "It's the sign of a sweeping social breakdown," Mr Klinenberg was quoted as saying. "Everyone is implicated in it."

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