Unlocking the secrets of the lucrative longevity economy
You can't afford to ignore the rapidly growing population of older consumers. Take the time to understand them and their real problems and desires with actuary Stephen Huppert's analytical view.
Most of you know I’m fascinated by the changing needs and wants of modern older consumers, particularly as lives lengthen. And sometimes, it’s better to hear my passion for this industry in cold, hard, analytical facts and data you can use in your own line of work.
So today I invited the very experienced actuary and Superannuation Consultant, Stephen Huppert, to help us break out the numbers and understand a bit more about this longevity economy that is emerging rapidly and globally, from an Australian perspective.
As an actuary, Stephen’s career has been spent using his mathematical skills to solve the problems of superannuation funds and investment companies, most specifically by understanding the probability of people living longer than their money and helping to develop products that solve for it.
What is the longevity economy? Why you should care
Population ageing is a dominant demographic trend that will have wide-ranging implications for Governments, economies, businesses, societies and individuals. You should care!
Along with the rest of the developed world, Australia's population is ageing, reflecting significant reductions in mortality and, to a lesser extent, lower fertility rates. It is the older ages that have the most significant population growth, rapidly changing the demographic shape of society and the economy. These changes are driving increasing demand for various services often required at advanced ages.
The economic opportunities and challenges arising from the growing aging population are collectively called the Longevity Economy.
Many have the Longevity Economy covering those aged 50 and above. However, even if you use an older age as the definition, this population segment represents a significant and growing market segment, and their needs and preferences drive new products and services.
Population projections by researchers in the ARC Centre of Excellence in Population Ageing Research (CEPAR) show this accelerating growth in Australia's population at the highest ages (see Chart 1).
Chart 1: Projected population over 65
"The centenarian population, which means those aged 100 and over, will grow at an even faster rate – increasing by 200% from 5,300 in 2021 to 15,900 by 2041", says Dr Tom Wilson, CEPAR Principal Research Fellow at the University of Melbourne (see Table 1). During the same period, the proportion of the population under 10 is projected to fall from 12% to 11%, while the proportion over 65 will increase from 17% to 21%.
Table 1: Projected population of older cohorts
In 2005, Australians aged 65 or older outnumbered children younger than 10.
Mortality rates and life expectancy
These demographic trends reflect significant increases in life expectancy and, to a lesser extent, lower fertility rates. The latest life tables from the Australian Bureau of Statistics (ABS) showed Australia's life expectancy has continued to rise, now ranking third highest globally.
While the ABS is expecting the impact of Covid-19 to have a negative effect on Australia's life expectancy when the next results are released, the Australian life expectancy at birth for males is now 81.3 years and for females 85.4 years. However, more important for understanding the Longevity Economy are the life expectancies of older Australians. This is where the most significant improvements have occurred over the last 50 years (see Chart 2).
Chart 2: Life Expectancy at age 65
Given the improvements over time, most people born in the past century have lived far beyond their life expectancy at birth. For example, I was born in 1961. The Australian Life Tables (ALT) 1960-1962 tell me that my life expectancy at birth was about 68 years. Now that I have reached the age of 62, according to ALT 2019-21, my life expectancy is 85—and that is still based on historical data.
Individual life expectancy
Leaving full-time work is confronting challenge for many Australians. A retirement plan should cover both financial and non-financial aspects of life, and there are many unknowns to factor in. One of the biggest unknowns is estimating how long the plan needs to last, the future lifespan. This is called longevity risk, the risk of outliving your savings.
Basic life expectancy numbers such as those quoted above are handy for analysing trends and differences between groups of people. However, they are definitely not suitable for retirement planning. It is essential to consider mortality improvements along with gender, socio-economic and health differences at the individual level.
It helps to appreciate the difference between chronological age, how many times you have circled the sun, and biological age, an assessment of future lifespan based on physiology at any given time. There is significant research in longevity medicine aimed at reducing biological age.
David Sinclair, a Harvard biologist and anti-aging researcher, is one of the more prominent researchers working on understanding why we age and how to slow its effects. He lives by his research and, in early March 2023, claimed, "My calculated biological age has been going down for the past decade or more to a point where I'm predicted to live at least a decade longer than I would have if I hadn't done anything."
While the debate about whether we can significantly increase life expectancy takes place, we also need to think about increasing healthspan, the healthy period of one's life, as well as lifespan. Some of the more radical research might sound like science fiction—living to 200, anyone? However, the research is producing plenty of accepted interventions around diet and exercise that can be beneficial in increasing both healthspan and lifespan.
Challenges and opportunities
The Government released the fifth edition of the Intergenerational Report in 2021. This report examines the long-term sustainability of current policies and how demographic, technological and other structural trends may affect the economy and the budget over the next 40 years. It said the ageing population presents long-term economic and fiscal challenges, including greater government spending on healthcare, the Age Pension and end-of-life support.
Two recent Government announcements, one here in Australia and the other in France, highlight the challenges for governments in responding to these challenges.
In France, President Emmanuel Macron wants to raise the legal retirement age to 64 from 62. This has resulted in strikes and riots opposing this move. Macron says this change is essential to put France's pension system on a firmer financial footing as life expectancy rises and the ratio of workers to retirees decreases.
In Australia, Treasurer Jim Chalmers started a debate around the affordability and equity of tax concessions available in superannuation. He then ignited a political row by announcing an increase from a 15% to a 30% tax rate on earnings for balances above $3 million.
While Government is working through these challenges, many businesses see the opportunities in the Longevity Economy to develop products and services that meet the needs of older adults. All businesses should consider developing a longevity strategy to consider the impact of demographic shifts on their employees and customers.
With respect to employees, is ageing part of your Diversity & Inclusion Agenda? Ageism is a growing phenomenon in both society at large and in the workplace. For the first time, we are seeing five generations in the workplace. What is the best way to manage an intergenerational workforce, so everyone makes a valuable contribution? What role can an employer play to help their employees with the transition to retirement in a way that suits both parties?
When it comes to the customer, do you consider the 65+ age group in product design exercises? For example, in the UK, supermarkets are working on providing more support to older or more vulnerable customers in everything from the packaging and placement on the shelves to the size of the keys at the self-checkout.
The Adelaide-based Global Centre for Modern Ageing (GCMA) helps improve older people's lives. Its LifeLab studio is a simulated real-life environment where researchers and businesses can co-design and validate products, services and experiences that will better serve the lives of ageing people.
GCMA is part of what is known as the AgeTech, digital technology built around older adults' needs and wants while including them in the design process. AgeTech solutions can be broadly categorised in the following areas:
Social & Connectivity
Mobility & Transportation
Activities of Daily Living
AgeTech-specific venture capital funds are springing up to support these endeavours, attracted by the opportunities in the Longevity Economy.
Increasing life expectancy and the growing number of older adults will create challenges for individuals and organisations. However, that creates plenty of opportunities for those that embrace the Longevity Economy.
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In longevity news
The healthspan revolution: How to live a long, strong and happy life, John Harris, The Guardian
Rethink retirement to work for all Australians, Nick Hamilton, The Australian
Longevity Venture Partners (LVP) US closes $30M fund and will focus on silvertech that increases longevity, healthspan and quality of life, Eleanor Garth, Longevity Technology
I’m a leading longevity scientist. Here’s why someone reading this could now live to 150, Luke Andrews, Daily Mail Australia