Should you cash in your defined benefit pension? When should you start to transfer assets to your children with an eye to avoiding inheritance tax? And should you release equity from your home?
These are questions I am asked all the time. They are, sadly, almost impossible to answer with much accuracy. However, if you knew the answer to another question – how old you will be when you die – you would have a much better chance.
Advances in gene testing mean it probably won’t be long before this can be predicted with more personalisation and accuracy than at present. For now, it is safe to assume that you will probably live much longer than you think.
Life expectancy statistics should be better known. We’ve gained an extra 30-odd years of life since the introduction of the state pension. If you are born today, you will have a one in three chance of living to 100. Those of us who make it into our 60s have an excellent chance of living into our 90s, something research from the University of California suggests those in their 60s and 70s hugely underestimate.
Much of this was discussed at The Longevity Forum at the Wellcome Collection this week. My favourite statistic from the day? A 20-year-old today has a better chance of having a living grandmother than a 20-year-old in 1900 had of having a living mother.
And older people are in remarkably good shape. It is beginning to look as if ageing is “malleable’ says Professor Laura L Carstensen, founding director of the Stanford Centre on Longevity. Some 50% of 85-year-olds say they are able to work. The incidence of dementia in the US is actually falling. And, as research from Enders Analysis notes, the over-50s – the “new old” – no longer act their age. They are apparently “down-ageing: acting younger and spending much more than they ever did before”. It is not old age that is getting longer, it is middle age.
This is a complete reshaping of the world as we know it. Until the 1950s, all countries had pyramid-shaped populations – lots of young people at the bottom and a couple of wrinklies at the top. These days, those pyramids are fast turning into rectangles. This is not being recognised by our institutions.
Corporations aren’t adjusting to the new demographics
Look around you. Corporations haven’t adjusted to fast-rising lifespans – try changing career at 55, or even sticking with your original one past 65. Neither has education – if you are going to live to 95, why stop learning at 16, 18 or even 21 and never restart?
And as for finance, the industry will still try to “lifestyle” your portfolio into bonds at 50 regardless of the fact that you have barely hit middle age. And the property market is also lacking. As it becomes possible for four generations of one family to be alive at the same time (without it involving teenage pregnancies) we are still segregating those generations by building miserable rabbit hutch homes for the young and even more miserable retirement flats for the old.
The state hasn’t adjusted either. At the forum, Adair Turner gleefully waved his free travel pass (available to the over-60s in London). If he is in good enough shape to perform at high-level conferences, he does not need taxpayer support to take the Tube. A thinking government wouldn’t drive itself to the financial wall to give it to him.
The Baby Boomers and Generation X need to kick back against all this absurd ageism. There’s a delightful example of someone doing just this in the Netherlands. Emile Ratelband is in the middle of a legal battle to change his age. He is currently 69, but wants to change his birth date to March 11 1969, in order to be 49 again, something he reckons would help him get both work and Tinder dates.
He’s probably right on this – and he says he’s happy to renounce his pension. But it really shouldn’t be necessary for the over-60s to enter the self-identification row to get satisfaction.
We need to encourage systems where people can dip in and out of education over a lifetime and are better able to change careers, and hence find ways to let even those in their 80s be productive, valued members of society.
Two things investors need to consider
From an investor’s point of view, there are two things to think about here. If you are stock-picking for the long term, it might make sense to buy into companies that get this. Look at the marketing strategies of most companies. Cruise ship, slipper and stair lift products aside, you will see that they are marketing to the wrong age group.
The median pound in the UK is spent by a household headed by a 47-year-old, says Enders. But advertisers remain fixated not on them but on Generation Y (born between 1980 and 1995). That’s probably a big mistake.
Secondly, the idea of longevity is extremely attractive to investors. Any product that turns out to extend life is going to fly off the shelves. It’s also being talked about more and more as a sector in its own right and the amount of cash pouring into the sector is accelerating fast – something that means it may soon generate its very own speculative mania.
It is early days for the investability of this sector, but the easiest way to access it is probably via a thematic exchange traded fund; perhaps the Global X Longevity Thematic ETF (Nasdaq: LNGR). Otherwise, Axa has jumped on the bandwagon by rejigging a health fund to create the Axa WF Framlington Longevity Economy fund (available via some wealth managers).
Finally, from a non-financial point of view, you need to think about how to make all your extra years happy and purposeful (which brings us back to education and work). You will also be wondering how to make absolutely sure you are one of those who gets to enjoy many healthy extra years. On that score, I have less welcome news. One thing that all the experts at the Longevity Forum agreed on was: “Exercise is the strongest anti-ageing medicine there is.”
• This article was first published in the Financial Times