“Will you still need me, will you still feed me, when I’m 64?” These Beatles lyrics were conveniently used to illustrate some of the issues around aging that were discussed in a “preparing for aging” discussion session. I say conveniently because it is in keeping with the rock music thread that I have tried to maintain through these blogs. Interestingly, if Paul McCartney were writing today and wishing to be biologically up-to-date, the lyrics would finish with when I‘m 80. Ignoring the fact that the lyrics wouldn’t sound quite right, it is a reflection of the tremendous increases in average life span which have occurred in the last fifty years.
Although Davos is addressing some of the other critical issues faced by the global community today, such as growing income inequality, the deteriorating natural environment and the conflicts in Syria and Mali, the aging population in many countries is one of the most important issues that the world is facing. In an interesting conversation that included the Minister of Labour of a major European country, the Finance Minister of another European country and the head of the national pension plan of a major Asian country, we concluded that a healthy financial support system for aging populations should combine public and private savings plans (the Australian superannuation scheme received recognition for being both mandatory and fully funded), extending the age at which benefits should start to be paid and encouraging greater financial literacy regarding the importance of retirement savings.
An interesting, if sobering, statistic that was quoted, which I may not repeat completely correctly, is that one percent of UK adults have a retirement plan and only twenty percent have thought at all about retirement planning. Other critical elements that are important are quality healthcare, particularly in the preventative medicine realm, and increasing the percentage of women in the workforce. The women in the workforce point is particularly important in countries such as Japan, where the retirement system will struggle to cope with a retiring work force when the active workforce is primarily male and thus the number of active workers is smaller than it would be if more women were in the work force. One of the rating agencies in attendance made it clear that all of these things factored into how they evaluate a country’s sovereign credit rating.
The last element that we discussed was the importance of professional investment management. Although real estate did not come up in the conversation, it is ideally suited to pension plans given the increasingly long-term nature of their liabilities and the stability of real estate cash flows. We can have an important hand in this increasingly important issue and we, as a firm, should ensure that we do participate in this debate.
This evening I joined a dinner with Larry Summers, previously U.S. Treasury Secretary and President of Harvard University, Laura Tyson, previously Chair of the President’s Council of Economic Advisors and Sanusi Lamido Sanusi, Governor of the Central Bank of Nigeria on the topic of “Can Capitalism Evolve?” The answer is clearly yes, but it is difficult to summarise and the specific desired outcome varies by culture/country.
One last comment on aging. The definition of someone who is old is “someone older than me”.
All the best,