FCA discussion paper outlines raft of challenges from ageing population

The challenge posed by changing demographics and increasing longevity has long been a subject of debate within the pensions industry. As people are expected to live longer in retirement, the ways they fund that retirement will also need to change. 

Duration of retirement is complicated by other aspects of ageing. The report says: "As we age, we are increasingly likely to suffer with health conditions and this brings forward a number of challenging issues, such as the provision of long-term care, handling cognitive decline, and ensuring appropriate access channels are available to those that need them."

It also alleges some things that, while potentially valid, would prompt a pretty stern response if suggested to elderly parents or grandparents: "Evidence also suggests that as we age we tend to rely less on reasoned, deliberative thinking and more on gut-feel and things learned through experience."

"Older people also find it more difficult to navigate the proliferation of choice. This emphasises the importance of framing products and services in a way that meets the needs of older people."

It is a point well made: the paper draws parallels with the challenges faced by elderly people assessing their healthcare options in the USA.

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Demographic change

The numbers outlined in the paper are stark. It cites government figures projecting the number of people in the UK aged over 65 will increase by 1.1m over the next five years. The proportion of people over 100 will increase by 40 per cent.

The paper is wide-ranging and covers many important issues, from an individual's tendency to underestimate their longevity, the role of advice, forms of communication and the adequacy of 'default pathways' for steering unengaged members towards a specific decumulation strategy, while preserving their ability to choose.

Another less obvious though equally pressing challenge faced by the elderly is how physical restrictions can limit their access to financial services, a challenge easy to miss for tech-savvy younger generations, in a world where smartphones enable more and more to be accomplished (or avoided) with minimal effort.

One correspondent to charity Age UK outlined the challenge as follows:

_{FCA discussion paper 'Ageing population and financial services'}

More to come

Alongside the paper, the FCA is developing a programme looking at key issues for the ageing population including a series of roundtables, research and meetings with stakeholders.

Further research will be conducted in the second half of this year. The process will culminate in recommendations for forming a regulatory strategy in 2017.