Back in 2004, in a world that years away from facing the global financial crisis of 2008, Brexit and the covid pandemic, news headlines warned of the risks of an ageing population and the possibility of a ‘demographic time bomb’ that could come with it.
In the same year, there were some 407,000 people in the UK aged over 90 in a population of just over 58million, according to figures from the Office for National Statistics.
Now, 20 years later, the number of those over 90 has risen by 53.7 per cent to 625,236, in a population of some 67million, some 15 per cent larger than it was in 2004.
Since mid-2023 alone, the number of those over 90 has jumped 2.2 per cent.
The number of people over the age of 100, some 16,600, has doubled the 8,300 that were over 100 in 2004.
With Britain’s population ageing so rapidly, this ‘time bomb’ is looking ever more likely to detonate, and it could have a significant effect on people’s finances and those of the country.
People are living longer, three years more than they were in 2004 on average, and as a result pensioners are finding that they need to fund longer retirements than ever before
As people live longer lives, more money is needed to fund care and state pensions for those in later life.
Meanwhile, a declining birth rates and a population skewed towards retirees means there is a shrinking tax base from whom the necessary funds can be raised.
Sam Alsop-Hall, co-founder of healthcare consultant Clive Henry Group, said: ‘We are sleepwalking into one of the greatest economic and health challenges in history.
‘The sharp rise in people living beyond 90 shows how urgently we must rethink retirement, housing and health policy.’
Funding a longer retirement
People are living longer, three years more than they were in 2004 on average. As a result, pensioners are finding that they need to fund longer retirements than ever before.
Many people approaching retirement will not be prepared to fund living costs well into their nineties, realising too late that their pot is not sufficient to cover their expenses over such a long period.
In order to avoid drawing down their pension too quickly, not to mention entering retirement with a pot that isn’t big enough, people need to build a detailed plan for their retirement expenses.
Almost a third of people don’t have a plan for funding their retirement, according to asset manager Aegon, and of those some 57 per cent are worried that they will run out of money during their retirement.
Retirement is now a long life-stage, not a short wind-down
Anita Wright, chartered financial planner at Ribble Wealth Managemen
Eamonn Prendergast chartered financial adviser at Palantir Financial Planning, said: ‘With the number of people aged 90 and over up more than 50 per cent in two decades, retirement now often lasts 30 years or more – far longer than many people plan for. This makes detailed cashflow forecasting essential.
‘People frequently underestimate how long they might live, how their spending will evolve, and how much care or support they may eventually need.’
The cost of care
With these longer retirements often comes the need to fund later life care, and this doesn’t come cheap.
The average care home costs £1,298 per week for residential care, according to Carehome.co.uk, with the cost of nursing care being as much as £1,535 per week.
In some areas, these figures can be much higher.
As they live longer, more pensioners will find themselves needing later life care for much longer periods. With the asset threshold to be eligible for council funding frozen at £23,250, these costs will quickly eat into pensioners’ savings.
At the same time, an ageing population piles pressure onto the already stripped-bare NHS, with more people likely to need healthcare services despite the number of tax-payers there to fund these services continuing to diminish.
‘It underlines the growing strain on public finances. The NHS, social care, and the State Pension – particularly the triple lock – are all under increasing pressure as longevity rises,’ Scott Gallacher, director at wealth manager Rowley Turton, said.
Alsop-Hall added: ‘Socially and politically, an ageing population will place even greater strain on the NHS and social care, demanding new models of community-based support and innovation.
‘This is both a warning and an opportunity to redesign how we live, work and age. The time to act is now.’
According to artificial intelligence consultants Clever Clogs AI, this is also likely to cause problems as app and online-based NHS booking systems and banking services are not designed with a growing number of elderly people in mind.
Collette Mason, AI solution architect, said: ‘You can’t design accessible healthcare tech when you’ve never watched arthritic fingers struggle to tap a small “change address” button before the timeout, or banking security that assumes everyone remembers six passwords and can read a text message in 30 seconds.
‘The fastest-growing demographic risks being automated out of GP appointments, prescription renewals and pension access by teams who’ve never experienced the reality they’re optimising against.’
Anita Wright, chartered financial planner at Ribble Wealth Management, said: ‘Retirement is now a long life-stage, not a short wind-down.
‘The risk isn’t just running out of money; it’s sequence risk, inflation erosion and late-life care costs colliding.’
The inheritance problem
Younger generations are also set to lose out from their parents and grandparents living longer.
As elderly people find themselves with longer retirements to fund, as well as care costs to pay for, planned inheritances for their children and grandchildren are likely to be hollowed out.
This is a problem for younger generations, as they are becoming increasingly reliant on inheritances from their parents to support their own finances as part of the ‘great wealth transfer’.
This is expected to see some £5trillion passed down over the next 30 years, according to Aberdeen.
Ribble Wealth Management’s Wright added: ‘Waiting for a windfall is not a strategy. Longer lives and rising care needs mean wealth often transfers later and in smaller chunks.’
A third of parents say they are concerned that their children won’t be able to retire, St James’s Place says, on the back of stagnant wages, and rising property prices.
‘The surge in longevity also affects the property market,’ Prendergast warns, he said: ‘Inheritances may come much later in life, delaying when younger generations can buy homes.
‘It’s another reason intergenerational planning, and not just investment returns, matters more than ever.’
This, according to Alsop-Hall, could see younger buyers locked out of the property market, as fewer homes change hands due to inheritance delays.
