Preparing for the economy of longevity 

The concept of a ‘normal retirement age’ must be dropped as part of a wider overhaul of retirement systems as we know them, according to consultants participating in a panel discussion hosted by Mercer on the theme of what the longevity economy means in practice. 

At the 2023 Davos conference, delegates were treated to a fascinating session on the challenges – and opportunities – being created in a society living longer with each generation. Chaired by Mercer President and CEO, Martine Ferland, viewpoints were put forward by panellists including HSBC Global Private Banking and Wealth CEO Annabel Spring, National Council on Ageing President and CEO Ramsey Alwin, Zurich Integrated Benefits Global Head of Broker Relationship Management Paolo Marini, and Mercer Global Chief Investment Strategist Rich Nuzum.

It became clear how vast the overhaul of retirement systems required is, with Nuzum highlighting that millions of workers need to recognise how they are set to be directly impacted.

Working towards a ‘normal’ retirement age no longer works, explained Nuzum, who questioned the ethics of letting people in their sixties work towards milestones that are now potentially redundant. 

“When we tell people we will raise the retirement age from 65 to 67, then they think they just have to get to 67,” he said. “But we know most people are going to have to work beyond that. Let’s be open and honest with them about that.”

Since 2019, life expectancy has increased by over six years around the world, while retirement ages have only gone up one year. Against this backdrop, delegates were told by the panel why widespread and holistic change is needed.

“Our retirement systems and healthcare systems weren’t sustainable 20 years ago, and they’re still unsustainable today,” added Nuzum. “The demographics are only getting worse.”

The concept of greater longevity creates challenges and will force change in how society and its institutions (employers, governments, retirement funds, etc) accommodate larger cohorts of older citizens, many of whom will still be in work. Protecting the wellbeing of these aged workers was highlighted as a prominent issue by Alwin, especially if they are likely to be working for decades to come. 

“As we recognise the future of retirement is work, we need to make sure we are building into systems that invest into human capital – leveraging the tax code to make investments just like we do with research and development so that skill building and learning is happening across lifespans,” Alwin told the panel.

Investment in tech is one such area that can play a role here, added Spring who highlighted the role nudges and integrated technology can play. “If you tell people what impact in retirement their contributions will have, we see discretionary additions double. You can really nudge people towards saving more for retirement,” she said. “So behavioural nudging can be a tremendously important structural change.”

Ultimately, with such a vast issue, panellist Marini, warned that viewing longevity solely as an economic matter would be a mistake.

“Longevity should not be seen through only a financing prism,” said Marini. “We want to lead longer lives, but also with more purpose, dignity, and good health. This is far more than just financing social security and retirement benefits.”

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