People are living longer. That sounds like good news, says Merryn Somerset Webb, but very few people have made proper financial plans for their retirement. And the government certainly hasn’t.
Make sure you have enough money to enjoy your extended golden years
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Is the rise in life expectancy in the West coming to an end? If you look at the data it seems to suggest that it is. In March this year, the Office for National Statistics (ONS) announced something depressing: a slight fall in life expectancy for pensioners six months for women and four for men.
Overall, life expectancy is still rising but at a much slower rate than everyone thought it would at a time when there is no war on, no nasty new disease on the rampage and no particular life-shortening social problem evident. Numbers out from the ONS this week show an increase of 0.1% for a child born between 2014 and 2016. There might be 571,245 people in their nineties living in the UK, but current data suggests that most of us will still only make it to our mid-to-late eighties.
This isn't just happening in the UK. In 2016 life expectancy in the US fell for the first time since 1993 and the rate of growth has slowed in most other developed countries. The average American woman is now forecast to only just scrape into her eighties and her husband probably won't.
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There is no shortage of experts out there prepared to explain why life expectancy has stalled. Maybe it's a result of the financial crisis, a failure of elderly care linked to austerity? Maybe it's obesity, something that could even make today's young the first generation to live shorter lives than their parents? Or maybe it is just that we are already close to the outer limits of possibility when it comes to life expectancy?
Yet look a little closer and talk to longevity experts and healthcare investors and a different picture emerges. The slowdown in life expectancy actually comes at a time when the science of ageing is getting very exciting. Much of the rise in life expectancy of the past 50 years has been down to environmental effects: the near eradication of real poverty in the West; the rise of universal medical treatment; antibiotics; better air quality; improved working conditions.
There is more of this to come. Look around today and you will see a good fewer heavy-smoking, overweight drinkers knocking about than was the case a decade or so ago. We are also still getting a helping hand from the gift that never stops giving: evolution. New research from geneticists at Columbia University suggests it is weeding out genetic variants linked to Alzheimer's disease and heavy smoking.
All these things should keep adding a little more to the numbers. They are also just the beginning. Next will come an enhanced understanding of what actually causes ageing and how it can be stalled, alongside the start of mass molecular fiddling. One example of the latter: you may have read about Silicon Valley tycoons having regular blood transfusions to rejuvenate. But most people involved in the longevity business are less likely to be doing this than be taking the generic and very cheap diabetes drug metformin, on the basis that it keeps blood sugar levels stable and so slows ageing for non-diabetics too.
In their new book Juvenesence: Investing in the Age of Longevity, Jim Mellon and Al Chalabi forecast that within the next 20 years average life expectancy in the developed world will rise to between 110 and 120. We will enter a new world in which "genetic engineering, cellular enhancements and organ replacements" will give us all the chance to be super-centenarians. Adopt the right lifestyle and drugs to make it through the next ten or 20 years and these technologies could give you at least another 20.
This makes the authors happy. Their book is full of soothing thoughts about how the old patterns of our lives be born, learn, earn, retire, expire will soon be upended. We will "learn continuously", have multiple careers and hobbies, and will start and connect with our families in very different ways.
That's going to sound lovely to most people. But you can bet there is a large group who find it totally terrifying: policymakers. Ageing populations are very expensive. Our systems aren't yet in any way equipped to cope with the odd half a million 90-year-olds the UK has already, let alone millions of 100-year olds. Our health and welfare systems were designed for a different era, and the unfunded liabilities of public and private pension funds are the kind of thing that never get addressed.
This should make individuals worry, too. Very few people have planned properly for their own retirements and even if they have, extended longevity will mean that the assumptions on which they have based their calculations are entirely wrong.
On top of this, almost no one will have planned for the fact that this will make governments that don't seriously reform my guess is that's all of them increasingly broke. Nor will they have planned for the obvious next step: that cash-strapped governments look to other people's capital for help.
If we do enter a new age of the long-lived, it will probably be less an age of the happy rentier than the very heavily taxed rentier. If you don't want to spend your 11th decade wishing that longevity science had never become a thing, think of what you once thought you should save for your retirement and triple it. Golden years? Working years.
This article was first published in the Financial Times
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Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).
After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times
Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.
Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.
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