We're all going to have to be a lot more flexible
As the world gets older, we'll all have to retire later and finance it for longer. That's going to take a major rethink about an awful lot of things, says Merryn Somerset Webb.
I’ve been trying to get a new gas cylinder for my barbecue in Edinburgh. I can’t. I’ve been to every distributor in town – no luck. I’m sure I could get one if I ventured beyond the ring road but what with work, children, cooking and housework, I can’t devote any more time to Calor chasing. We are back to cooking inside for now (please don’t write in and suggest charcoal – I’m trying to make our life easier).
This is maddening. But also slightly thrilling. It isn’t just gas that is in short supply, it is barbecues too. Look around and mostly you will see “sold out” signs. Capitalism will provide, of course (they’ll be back in stock soon), but in the meantime think of it as a brilliant reminder of how adaptable a people-driven economy is. We aren’t mad for inside or abroad. So we have replaced them with a gas’n’garden combo at home and a bit of staycationing (which may also account for July’s 11% year-on-year rise in new car sales).
The UK will need a lot more of this flexibility. There’s more coronavirus chaos to come (note the new lockdown in Aberdeen, which rather detracts from Nicola Sturgeon’s not-quite-true patter about Scotland having no Covid-19 deaths). But there are bigger things afoot too. Here’s a stunner of a statistic, taken from The New Long Life by Andrew Scott and Lynda Gratton (see here for our podcast with Scott). The UK’s population has never been older (we are obviously an ageing society). But we have also never been younger – thanks to the fall in the average mortality rate, “the average British person has never had so long to live”. It is this trend we must adapt to.
There are small signs that we are getting to grips with the fact that the age at which one is old has changed – think the removal of the automatic right to a free TV licence at 75. But there are bigger ones too. Lockdown has driven some early retirement, but this won’t be a long-term trend. The latest official data shows a major shift in people’s retirement expectations – 75% of us expect to retire later than 66 and we are all thinking hard about how our extra years should be used.
The shift in expected retirement dates is not just about the knowledge that more of us can play useful roles in the workplace for longer. It’s also about the knowledge that we have all those years to finance in a low-return world. This is wonderful, but challenging. It means changing the way we look at our long-term investments and being a lot more aware of the dynamics driving them than in the past.
It means thinking about sustainable income generation, rather than just dividends when we build portfolios (consider this week’s sharp cut to BP’s payout). It means regular rebalancing to keep the risks of capital losses lower. If you hold a lot of US tech, might there be something we have seen before (an asset bubble) brewing? Might now be the time to switch to more of a European bias? Max reckons the new deal in the European Union – a clear step on the uneasy path towards fiscal union – should make us more bullish on the region, and perhaps even on the euro.
Finally, it means insurance. Our favourite, gold, has just hit a new record high. It may be that everything’s going to be fine (as the gas shortage might suggest). But that’s not an unhedged bet we want to take. We’ll keep holding gold for now.