In Japan, one of the hottest stocks for investors lately has been MDM, a leading manufacturer of prosthetic joints. MDM’s business is being driven by the rapid growth of Japan’s elderly population, leading to predictions of a massive upswing in demand for its core product, hip replacements.
In fact, Japan now has the highest proportion of elderly citizens of any world country. Estimates two years ago came to the following stunning conclusion: every third person in Japan today is over 60.
On top of that, 26 per cent are aged 65 or over, and 12.5 per cent are aged 75 or above.
This doesn’t just create a top-heavy situation in Japanese society in general - it also presents challenges in specific social sectors. Behind the locked doors of Japan’s prisons, for instance, the number of inmates aged 60 or older has doubled over the past 15 years, to more than 10,000 today, leading, among other things, to rising healthcare costs in the penal system.
So demographic change can create ripples that are felt, not just in manufacturing and commerce, but through society as a whole.
In recent months we have mentioned the challenges that increasing longevity here in Northern Ireland presents for the state pension system.
In the next 30 years, the dependency ratio (number of workers compared to the number of retired people) is set to change from 3:1 to 1:1. This means a steady rise in payments going out of the state pension to increasing numbers of retired people, while contributions going into the scheme do not rise in step. It is a situation which could, if not addressed, lead to a pensions crisis.
The reason we must update this topic now is that some figures just hot off the press show, in graphic detail, precisely how the aging population is swelling in Northern Ireland.
According to the NI Statistics and Research Agency (Nisra), the number of people aged 85 and over in Northern Ireland grew by around 1,000 people per year throughout the decade to mid-2015. Our population aged 85 and over has now reached 35,500, or nearly two per cent of the population.
Two per cent might not sound like much, but it looks like it’s going to be a lot more soon. The rate of growth among this older age group is almost six times that of those under 85 (37.1 per cent and 6.7 per cent respectively).
On the whole, women continue to be more long-lived than men: over two thirds (67.3 per cent) of our over-85s are women - but men are catching up.
And at the very top of the age scale, a similar increase is happening.
The Queen and her staff over in Buck House are now sending out wheelbarrows full of telegrams to congratulate 100-year-olds here: there were 280 centenarians (aged 100 and over) in mid-2015. (By the way, if you want to live to a ripe old age, the regional breakdown shows that Ards & North Down is the place to be: 2.4 per cent of the population there – or 3,800 people – are over 85. The lowest level was in Derry & Strabane, with 1.4 per cent, or 2,100 people.)
Nisra’s figures contain a clear message for pension savers. With continuing growth in our elderly population, the mounting pressure on the state pension scheme could mean a crisis looming on the horizon.
The state pension might have provided a decent lifestyle in retirement for our parents’ generation, but that was in the ‘golden era’ of pension saving. Today, it is generally seen as a base line to be beefed up by private saving.
That’s why we should sit down with a financial adviser and make a plan to account for possible cuts to the state pension in the future, as successive governments tinker with the system in a bid to manage longevity change.
This could be the time to consider upping your contributions to a workplace pension, or setting yourself up with a personal pension as a second stream of income in retirement.
And remember: with our increasing longevity, that retirement could be a decade longer than you expect!
:: Michael Kennedy is an independent financial adviser and pensions specialist, and can be contacted on 028 71886005
