Start saving now to enjoy a longer life
PUBLISHED: 09:55 07 February 2020 | UPDATED: 09:55 07 February 2020
In less than 40 years, average life expectancy will be 100. How do we – and our pensions – handle that? asks Peter Sharkey.
According to a report published by Ofcom this week, under-16s are shunning the radio and turning instead to voice-activated smart speakers such as Alexa devices. The report found that for the first time, more children were listening to smart speakers than radio broadcasts.
To compile their report into children's media habits, Ofcom surveyed more than 3,500 youngsters aged between five and 15; they found that 36% of 12- to 15-year-olds prefer to use smart speakers rather than tune into the wireless. Ofcom also discovered that by the time they reach 15, a staggering 94% of children have their own mobile phone, while more than half of three and four-year-olds watch an hour of YouTube videos a day.
Unless you've been living on the moon, none of these findings will come as a major surprise.
Yet there's more. For example, the propensity to ditch regular television programmes in favour of streaming or watching digital platforms is something most under 30s prefer, while ownership of an electric or hybrid car is no longer considered eccentric. Meanwhile, once bustling high streets have been overtaken by online buying - even IKEA closed a major store this week because fewer people were visiting.
It's become clear that no-one uses a landline anymore, while information, for a homework, a job application, or even a newspaper article, is routinely sought online instead of from a book or other written source.
Will any of these developments come to a sudden, juddering halt? I doubt it; we are witnessing a pivotal point in human history which is driven by the phenomenal pace of technological change.
Baby Boomers like myself have already lived through an unprecedented period of social and structural change, the trigger for which was World War II. The 1944 Education Act was one of the most important pieces of legislation in the nation's history for it both improved educational standards and, most significantly, propelled social mobility. The Act ensured that higher education was no longer the preserve of the rich; if you were clever enough, you could attend university, irrespective of your background or bank balance.
The fruits of social mobility resulted in improvements beyond the ken of most boomers' grandparents. Between 1950-70, education, health provision, housing and the environment were dramatically improved as poverty was effectively eradicated. Meanwhile, items once considered luxurious, such as home telephones, a family car, foreign holidays and colour TV became the norm as home ownership soared. Property remains the repository of most boomers' wealth.
This brief reference to recent economic and social history might suggest that, from an investment perspective, there could be enormous merit in investing in companies or funds likely to deliver lasting technological change because it seems probable that some big names, oil giants or major retailers, perhaps, will inevitably fall by the wayside.
However, unless we experience a scientific breakthrough to rank with Newton's discovery of gravity, Faraday's discovery of electricity or Alexander Fleming's development of penicillin, there's one thing that will not change: everyone will continue to age.
As healthcare, diet and our environment continues to improve, life expectancy will maintain its upward trajectory.
According to the Office for National Statistics, by the mid-2030s, newly-born females are expected to live to 97; the average newborn male will live for 94 years. By 2057, newborn girls will have a life expectancy of a century.
The repercussions of the majority of people enjoying longer life expectancy are numerous.
For instance, our working lives will become much longer, which isn't necessarily a bad thing. At the same time, the official retirement age will continue to rise; by 2050, for example, it will be between 75-80 and it's extremely unlikely that the state pension will exist in its current form. It will be means-tested and available only to the very poorest. Third, private pensions will be compulsory, probably supplemented with a form of stakeholder pension.
Over more than half a century, we've grown used to the phenomenal pace of technological change as products from microwave ovens to smart speakers have emerged, each designed to make our lives easier. In the wake of this constant change, we must acknowledge that at some point, there will be a similarly dramatic upheaval of our state pension structure: it's unrealistic to expect perhaps 50 years' of working life pension contributions to support 30-odd years of retirement. In short, therefore, it's up to each of us to do something about providing for ourselves in retirement.
TAM Asset Management Ltd offer savers the opportunity to invest their savings in Investment ISA portfolios comprising a variety of different funds pursuing long-term cautious, balanced or adventurous strategies. For further details, please visit the MoneyMapp website.
For more financial advice, check out Peter Sharkey's regular column, The Week In Numbers.