Over the last 30 years, life expectancy at birth in the UK has been increasing by 2½ years per decade. A boy born now can expect to live to the age of 79, while a girl can expect to live to the age of 83. Moreover, the increase in life expectancy that we have seen in recent decades is expected to continue, so children born in 2030 will expect to live even longer than those born now.
The ageing of the population has clear implications for those who are of working age. To support themselves in retirement, people will have to save more while they are working and they will have to work longer. Both of these solutions present challenges to individuals, employers and government.
The savings rate in the UK has remained stubbornly low in comparison with international peers. Many large employers have put in place a variety of schemes – including share ownership schemes – that encourage their workers to save. But there remains a dearth of serious research that can inform us about how the detailed design of such schemes serves to incentivise different patterns of individual and aggregate saving. Insights from behavioural economics are likely to be useful here; in particular, the idea that small policy changes can ‘nudge’ people into behaving in radically different ways. At the Work Foundation, we are planning to investigate these issues using the Lancaster Experimental Economics Laboratory (LexEL), and our intent is that the insights we gain from this will be profitably put into practice in many organisations.
Longer working lives also have implications for organisations as they manage their human resources. Succession management, promotion structures, human resource development, an increased demand for flexible working, and the management of capacity issues are all likely to be challenged by increased longevity. The scale of change is likely to be accelerated by the move from defined benefit to defined contribution pensions, not least because the impact of economic turbulence on pension pots has been adverse, leading many workers to delay their retirement. The extent to which employers have prepared themselves for what is likely to be a very rapid change is unclear. More clear is the fact that, in the new world, they will need to learn best practice from each other very quickly.
At The Work Foundation, we are developing a new programme of research on ageing. This will cover all of the above issues and more. If you are interested in finding out more about our plans, please get in touch with me – I shall be most keen to hear from you.
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