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The NHS at 70 – what that means for retirement

The NHS turned 70 this year. In the past seven decades we have seen huge advances in medicine and science. In particular, the increase in life expectancy is a key achievement. When the NHS was founded in 1948, the life expectancy for men was 66, and for women, 71. Today those figures are 77.2 and 81.5. A healthy and fruitful retirement for many people is a welcome prospect1.

However, with the increase in life expectancy may come some difficult debates for our Society and some tough decisions for individuals.

The debate for Society as a whole

The key debate for Society is how to cope with, and pay for, an aging population amid conflicting demands for limited resources such as education for the younger generation. The UK may be facing a double-whammy of increasing care and health costs and a reducing number of taxpayers.

The success of the NHS means many diseases are reducing. However, the need for care will grow:

  • There will be an expected 25% increase in those who will need care between 2015 and 2025. Within eight years, there will be 2.8 million people over 65 needing nursing and social care, unable to cope alone – largely because of the toll of dementia in a growing elderly population. Cases of disability related to dementia will rise by 40% among people aged 65 to 84, with other forms of disability increasing by about 31%.
  • These figures take into account for the first time the changing disease burden as well as the increasing elderly population and longer life expectancy. Cardiovascular disease, which can cause heart attacks and strokes, has gone down, but dementia is rising as people live longer2.

As we live longer, the cost of our care increases significantly.

NHS spending by age

Graph, average spend by age – 30:£1000; 40:£1000; 50:£1700; 60:£1800; 70:£3100; 80:£4800; 90:£7900.3

What does that mean for society?

It means tough questions for society. One of the biggest issues for our society and Government is how to pay for social care as people grow older and how to make sure people make the most of their retirement. There are several strands to this issue:

  • Government will need to consider issues such as intergenerational fairness. The extent to which the burden of care falls on the individual with implications for inheritances, or whether the burden falls upon the tax paying public more generally.
  • A simpler system for the provision of social care articulated more clearly, could help people make informed choices about their retirement and later life. Paying for care needs to become part of our normal financial planning. It may be time to look at different ways of paying for care that people fine equitable and palatable – a clear national strategy is needed.
  • Government could consider whether pension resources could be used more flexibly. Given the average stay in a care home is almost 3 years, perhaps more flexibility would enable people to take larger sums from their pension to pay for care within a tax framework that complemented that purpose. Residual pension assets left on death would still be passed on to dependants and loved ones.

How do we, as a society, encourage and incentivise people to save more towards their own retirement and care? Auto-enrolment has already gone some way to helping people save for their retirement. However:

  • Current contribution rates of 8% will leave many middle income earners far short of an adequate retirement income
  • The reduction in home ownership means people renting in retirement will need a higher income to enable them to continue to pay their rent
  • 80% of self-employed people are not paying into a pension. 4
  • Many part-time workers or those with multiple low-paid jobs do not qualify for the £10,000 auto-enrolment threshold.

These are issues for policymakers, society and Government to debate and resolve, with input from pension providers, advisers and consumer groups.

What can employers do now to support their employees?

  • Use all the support material available to you from your pension provider to make sure all your employees know the value and importance of their pension
  • If you haven’t done so already, think about a bulk transfer campaign to help your employees get all their pensions savings in one place – making it easier for them to plan their retirement.
  • Consider whether increasing your employer contribution might help with staff retention and well-being.
  • Think about getting a face-to-face seminar or meeting with your pension provider and your employees to address any of their concerns and help them understand the value of their scheme.

sources

  1. Office for National Statistics
  2. Forecasted trends in disability and life expectancy in England and Wales up to 2025: a modelling study
  3. Chart 3.7 (p48) of Office for Budget Responsibility Fiscal Sustainability report 2017. Costs are reported for individuals of each age between 0 and 90 years, relative to the average cost of treating a 30-year-old in the UK.
  4. Taylor Report page 78

For Employer Use only
Information correct as at September 2018