There is a major force reshaping pensions and it is unstoppable, it’s called demographics and it will require the pensions industry to rethink everything it does.

We’ve known for many years that longer lifespans and far more older people would have a profound impact on pensions planning.

The scale of the changes came home to me this week with a report from ONS on the rapid ageing of the population. The report was featured in Financial Planning Today.

While there was a slight dip in life expectancy during the Covid pandemic, this has had little impact on the fundamentals: we will simply have many more older people in future. More people over 80, more over 90 and more over 100. 

Of course, as I’ve said before, longer lifespans are something to be celebrated, a product of better incomes and lifestyles, the NHS whole-life care package and better health.

This is all good news, the challenge is how to pay for those later years of life, some of which could be very expensive and require additional care and cost.

It’s worth looking at the scale of the issue.

According to the ONS the number of people aged 100 or over has doubled in the last 20 years to more than 16,000. There is no reason to suppose it will not double again over the next 20 years. This provides more work for Buckingham Palace sending out congratulations cards and many will see it, rightly, as a great achievement. We do, of course, have a much bigger population than 20 years ago so there are simply more people around and more older people but it’s still fact to be admired.

Lower down the age range the number of 90-year-olds is steadily climbing too. In 2023 the estimated population aged 90 years and over was 611,719 - equivalent to two Newcastles. It will grow further. 

The are big regional differences in life expectancy and also between affluent and poorer areas. As I’ve written before, the UK has yet to tackle the income pension gap which effectively discriminates against the poorest in our country who get less state pension than the richest people - a dreadful wrong. This is a subject I will return to another time.

For now, the main issue is how the pensions industry can keep up with an ageing population. Pension products for those living well past 90, if they are in poor health, may begin to merge with care products.

There are also, of course, issues around retirement income over such a long period post retirement and the actuaries will be reaching for their calculators to assess the impact of a very sizeable, much older population. 

There are some positive signs the industry is beginning to grasp some of these issues but it is early days. One thing I am clear on is that raising the retirement age time and time again is not the answer and simply makes huge numbers of pensioners poorer and less able to meet the cost of living challenges many currently face.

Pensioners, of whatever background, deserve to live in reasonable comfort and dignity in retirement and this must be the overriding aim of any changes.

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Kevin O’Donnell is editor of Financial Planning Today and a journalist with 40 years of experience in finance, business and mainstream news. This topical comment on the Financial Planning news appears most weeks, usually on Fridays but occasionally other days.  Email: This email address is being protected from spambots. You need JavaScript enabled to view it. Follow @FPT_Kevin 

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