Will Young People Bear the Burden of the UK's Ageing Society?

Young people in the UK are set to face serious financial and societal challenges due to the government’s inadequate response to the issues stemming from an ageing population, according to a recent House of Lords report. The report highlights the pressing need for younger generations to plan for longer working lives and to save more from an earlier age, amidst a crisis in adult social care that requires urgent attention.

Last updated: 02 October 2023 (BST)

What’s happening now

The House of Lords Economic Affairs Committee has released a report that underscores the impending challenges faced by young people as a result of an ageing population. This report suggests that successive governments have not adequately prioritised policies to address the financial implications of an ageing demographic. Key recommendations include encouraging older individuals to remain in or re-enter the workforce and implementing educational campaigns to raise awareness about retirement costs. The report also criticises current government strategies, such as raising the state pension age, as inadequate solutions to the broader issues at hand.

Key takeaways

Young people will need to work longer and save more due to the ageing population.
There is an urgent need for reform in adult social care.
The government must implement policies to encourage older workers to remain in employment.
Widespread ignorance exists about the costs associated with retirement.
A public education campaign on financial planning for retirement is recommended.

Timeline: how we got here

Several key events have led to the current situation regarding the ageing population and its implications for younger generations:

2014: The UK government begins raising the state pension age, aiming to alleviate financial pressure on the state.
2017: The House of Lords publishes a report on the implications of an ageing population, noting the growing need for social care.
2020: The COVID-19 pandemic highlights weaknesses in the adult social care system.
October 2023: The latest House of Lords report calls for urgent reforms and highlights the need for young people to adapt their financial planning.

What’s new vs what’s known

New today/this week

The most recent report from the House of Lords has brought to light the anticipated struggles that young people will face due to the ageing population. It urges immediate government action to address these challenges, particularly in adult social care and financial planning education.

What was already established

It has been known for some time that the UK’s population is ageing, leading to increased pressure on pensions and social care systems. Previous reports have flagged the need for government intervention to prepare younger generations for these challenges.

Impact for the UK

Consumers and households

As the population ages, young people may find themselves bearing a heavier financial burden. This includes higher taxes to support pensions and social care for an increasing number of elderly citizens. The need for early financial planning is paramount, as many young people are ill-prepared for the costs associated with retirement.

Businesses and jobs

For businesses, an ageing workforce may result in labour shortages in various sectors, particularly those that require physical work. Encouraging older workers to remain employed could be crucial for maintaining productivity. Companies may need to adapt their hiring practices and workplace environments to accommodate an older workforce.

Policy and regulation

The UK government, along with devolved administrations, will need to consider policies that address the needs of an ageing population while also supporting younger generations. Upcoming consultations and legislative measures will likely focus on social care reform and incentives for older workers to stay in the labour force.

Numbers that matter

By 2040, it is projected that over 25% of the UK population will be aged 65 and over.
It is estimated that the costs of adult social care could rise to £50 billion annually by 2030.
The state pension age is currently set to rise to 67 by 2028.
Approximately 50% of individuals aged 18-24 are unaware of how much they need to save for retirement.
Only 30% of young people currently engage in consistent financial planning for their retirement.

Definitions and jargon buster

Ageing population: A demographic trend where the proportion of older individuals increases in a population.
Adult social care: Services that support adults with personal care needs, often linked to ageing.
State pension age: The age at which an individual becomes eligible to receive the state pension from the government.

How to think about the next steps

Near term (0–4 weeks)

In the short term, young people should begin reviewing their financial plans and savings strategies. This may involve seeking advice from financial planners or engaging in educational resources about retirement planning.

Medium term (1–6 months)

Over the next few months, individuals may want to consider actively participating in financial literacy programs or workshops that focus on retirement savings and investment strategies.

Signals to watch

Monitor government announcements regarding changes to pension regulations or social care funding.
Observe trends in the job market for older workers and how businesses adapt to an ageing workforce.
Stay informed about the results of public consultations focusing on financial education initiatives.

Practical guidance

Do

Start saving for retirement as early as possible, even in small amounts.
Educate yourself about financial management and retirement planning.
Engage in discussions about workplace policies that support older workers.

Don’t

Don’t wait until you’re older to start thinking about retirement.
Don’t assume that the state pension will be sufficient for your needs.
Don’t ignore the importance of health and social care services in your financial planning.

Checklist

Assess your current savings and retirement plan.
Research financial literacy resources available in your community.
Identify potential career paths that may allow for flexible working as you age.
Understand the implications of the state pension age on your retirement.
Engage with financial advisors to set realistic savings goals.

Risks, caveats, and uncertainties

While the report highlights significant concerns, it also faces uncertainties related to economic conditions, government policy changes, and societal attitudes towards ageing. The effectiveness of proposed solutions remains to be seen, and the financial services sector may not currently be equipped to handle the evolving needs of an ageing population.

Bottom line

The House of Lords report serves as a critical wake-up call for both the government and young people in the UK. Proactive measures are needed to prepare for the financial implications of an ageing population. As younger generations face the dual challenge of planning for retirement and addressing the growing needs of elderly care, immediate action is vital.

FAQs

How will the ageing population affect young people in the UK?

The ageing population will create financial pressures on young people, including higher taxes and the necessity for them to save more for their retirement, as outlined in the House of Lords report.

What should young people do to prepare for retirement?

Young people should start saving early, educate themselves about financial planning, and engage in discussions about the implications of an ageing population on their future.

What are the government’s current strategies to address ageing?

Current strategies include raising the state pension age and encouraging older workers to remain in the workforce, but these measures alone are deemed insufficient by the House of Lords report.