Horizon scanning – An ageing society

In the second installment of our new blog series, Richard Butcher delves into the types of questions trustees should be asking about the impact of our ageing population on their pension schemes.

Questions for trustees/IGCs to ask:

  • What is our vulnerable member process and do we have the capacity to scale it up?
  • For DC: Do we need to improve our at-retirement “decision architecture” to help
    members get to the best outcome?
  • For DC: How can we improve the in-retirement options to reduce the risk of over/under-spend?
  • Are our anti-scam processes state of the art and will they continue to be?


There are three horizons to look to. The near horizon, which is stuff we’re aware and have a pretty good understanding of; the far horizon which is stuff we’re aware of but don’t yet fully understand; and over the horizon, which is stuff we’re not aware of but still need to be prepared for. 

This blog considers a far horizon item – the impact of our ageing society.

The ONS have some great tools on their website here that are designed to help us understand what is happening to the shape of our society. But to really appreciate the impact you must really think about the numbers.

What they show is that we are, as a population, getting older at a rapid rate. I accept this won’t be news to you but let me give you some numbers to shock you out of the old-news stupor you may have just dropped into. Over the period 2018-38 our population will grow by 9%, but the under 45s will grow by just 2% (i.e. relatively they will shrink), while the over 75s (the almost certainly retired population) will grow by 58% (the over 90s, admittedly a small group, will grow by 126%!). That is a massive shift.

So, we’re living longer. So what?

The “what” is the way this interacts with other changes in our ecosystem.

Firstly, adequacy. Research done in 2016 by the PLSA revealed that more than 6% of the working population were at a high risk of having a pension below around £10,000 a year and that a whopping 53% were at risk of not getting to the old 2/3rds of pre-retirement income target. They attributed this to us living longer and the decline of DB schemes, amongst other things. These conclusions took account of the positive impact of AE.

In other words, we don’t collectively have enough pension savings and the result is that we are, on average, having to work longer. The real retirement age has crept up over the years, which, combined with the relative decline in the younger population, means our workforce is older.

“Freedom and choice” has, since its introduction in 2015, become the default route for most people to access their retirement savings. But, to date, it’s probably too early to draw conclusions on whether it will be a successful policy. On the one hand, there’s little evidence to suggest people are using their savings frivolously. On the other hand, at this point, the average pot size is so small that it’s difficult to draw a conclusion. The average withdrawal rate in 2020 was 8%. That’s roughly double a racy sustainable withdrawal rate but in the context of a pot worth less than £40k does it matter?

The benefits of F&C were talked about when the policy was launched. What was much less discussed, though, were the risks; withdrawing too slowly, withdrawing too quickly, and/or ultimately running out of money – the second because we spent too quickly or because we live longer than expected.

A further risk has emerged in the wake of F&C: scam risk. Pension scams, as a criminal or at least highly morally suspect activity, used to be rare although there were plenty of mis-selling scandals. F&C seems to have changed that. The relatively easy access to cash for many more people has acted as a honey pot to those driven by dubious intentions.

The third factor is cognitive decline. We start to lose brain function from about the age of 40, but the brain is a clever thing. Rather like building muscle to compensate for joint injury, the brain will hack itself; rerouting functions and building new connections to bypass its weaknesses. But it runs out of hacks over time and then decline is inevitable. On average this starts to have a material impact at about the age of 75. Put simply, complex decisions become more difficult as you age. 

So, what if we pull this together: we have an ageing workforce with too little pension saving, who run the risk of running out of money or being scammed, and who will have to make complex decisions much later in life, while at the same time becoming less able to make those decisions.

If this analysis is correct, there are many things that must be done.

We need to build more robust processes with greater capacity to deal with those vulnerable members. We’ll need to meet them as they age and lead them to and through a good outcome. And we need to find a way, once again, of socialising the risk of living to a grand age. 

We will need to build default pathways through to better outcomes – to stop freedom and choice becoming a de facto default simply because of a lack of understanding or because of a scammer’s greater understanding.

We will need to keep on our toes to keep the scammers at bay.

Summary table:

The impact of our ageing society (assuming no mitigation)

Short term

Not much noticeable change, although actual retirement age and vulnerability continues to creep up.


Actual retirement age and vulnerability continue to creep up. Increase in state pension age (SPA). Debate about the end of a single SPA for all (given gender, demographic, and regional differences, among others)?


Schemes unable to look after elderly members.


Increased vulnerability of members approaching, going through and beyond retirement.



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