Evidence to House of Lords Committee on Demographic Change - Ros Altmann

    Ros is a leading authority on later life issues, including pensions,
    social care and retirement policy. Numerous major awards have recognised
    her work to demystify finance and make pensions work better for people.
    She was the UK Pensions Minister from 2015 – 16 and is a member
    of the House of Lords where she sits as Baroness Altmann of Tottenham.

  • Ros Altmann

    Ros Altmann

    Evidence to House of Lords Committee on Demographic Change

    Evidence to House of Lords Committee on Demographic Change

    Saga Full Response To House Of Lords Select Committee Consultation On Public Service And Demographic Change:

    by Dr. Ros Altmann

    (All material on this page is subject to copyright and must not be reproduced without the author’s permission.)

    1. Does our culture about age and its onset need to change and, if so, how?

    Our culture and attitudes to age are significantly out of date. Medical advances in the past few decades mean that people are living much healthier and longer lives, and are fitter and stronger in later life than ever before. People now recover from, or live well with illnesses that would have disabled them in the past. Heart problems, diabetes, cancer, bronchial problems – all of these conditions often associated with older people, will no longer prevent them from living active lives.

    In short, people are not necessarily ‘old’ at 50, 60 or even 70 any more. In the past, those in their fifties or beyond would often be physically less strong than younger generations, would have short periods of life left and often suffered from ailments that impaired their daily lives significantly. This is not generally the case any more.

    Saga, for example, has changed the range of its holidays to suit the active older person. We know that just because someone has reached a particular chronological age, there is no reason to stereotype them as only fit to undertake limited activities. Sixty and seventy-somethings these days are going on our holidays to Borneo, trekking to Everest Base Camp, exploring the Amazon and much more.

    Chronological age is no longer a barrier to being active and healthy. Running marathons, swimming the channel, taking up new sports and interests are open to people of all ages, and the old stereotypes are breaking down.

    Changing this culture of age requires a change of attitude: overcoming age discrimination, ensuring older people are not ‘written off’ just because of their age, embracing the opportunities that are now available. The media has a large role to play here. Far too often, when there is a story about older people, the media show an image of someone nearer 100 than 60!

    The media also tends to glamourise youth, with older people considered ‘past it’ (whatever ‘it’ is) while steering away from showing images of men – and especially women – in their later years. Grey hair is out, smooth wrinkle-free skin seems to be essential.

    However, things are slowly starting to change. The Government has rightly outlawed age discrimination and also abolished the default retirement age. Both of these are important steps in the right direction.

    It would be helpful to think of people as people, and take them as they come, rather than pigeonholing them into a certain ‘box’ just because of their chronological age. There are enormous variations between individuals at all ages and later life – from ones 50s, 60s or 70s onwards still constitutes many different phases.

    Even retirement itself is now being rethought. There are opportunities for working part-time, rather than suddenly stopping altogether. This is a whole new phase of life – ‘bonus years’ – which previous generations could not normally enjoy. The successes of medical practices and work practices, which now mean work is physically less demanding and people are no longer incapacitated by diseases in later life, allow people to stay actively engaged in the workplace as they get older, rather than having to stop altogether. Helping people embrace these bonus years, with Government encouragement, would be really helpful in promoting the cultural change that we need.

    2. Do our expectations and attitudes about work, savings, retirement and independence need to change and if so, how?

    The government’s decision to abolish the default retirement age is an excellent first step in moving towards the new future for work and retirement, with retirement becoming a process, rather than an event. It is very unhealthy for people to be working full-time one day, then suddenly not working at all the next day. Indeed, many people find it difficult to adjust to life without any work at all. Some people define themselves by their work, or enjoy the social interaction and feeling of usefulness in doing a job. Indeed, there is a condition known as ‘sudden death retirement syndrome’ where older people who retire suddenly lose the will to live and die soon after retirement.

    Attitudes to work and retirement are very outdated. Having become prevalent in the 1980s and 1990s, the concept of ‘early retirement’ led to unrealistic expectations for the next generation that economic progress should entail people retiring earlier than previous generations.

    This notion of ‘early retirement’ being something to aspire to needs to be abandoned. It is not good for individuals, for society or for the economy. The idea that people should expect to stop working and have good pensions from their early 50s onwards for the rest of their life (which could be another 40 or 50 years!) does not fit twenty-first century realities – it is financially unaffordable for the vast majority of the population.

    Early retirement was convenient during the period when the baby boom generation was entering the labour market and the older generations at that time had experienced dramatic change in the workplace, with traditional industries closing down and many were in poor health due to industrial strains. They often needed to stop working due to physical limitations and lack of modern skills. Meanwhile, there were so many younger people (baby boomers) coming into the jobs market looking for work and ready to embrace new technologies and working environments, that it made sense for older people to retire. And because they often had very generous final salary pension schemes which were all thought to have big surpluses, company management could easily offer people good early retirement pensions, thinking it was all going to be paid for by strong future investment returns from the stock market, which most pension funds were relying on.

    So, until a few years ago, most people were already retired before state pension age. However, the trends are once more moving in the opposite direction. As final salary pension schemes have closed, as life expectancy has continued to rise, as people have realised that the costs of providing good pensions is actually far higher than previously realised, and as the baby boomers themselves are approaching traditional retirement age, people are realising that old attitudes to retirement and to pensions need to change.

    As regards retirement, people are now thinking about working longer than they would have previously intended – although many would prefer to work part-time if they can. Some of those who did retire early ended up going back to work, or doing voluntary work, because they were bored. Some have returned to work part-time or retrained to do other things. This is the way of the future in my view.

    As regards saving for retirement, the previous assumptions that small amounts of saving can lead to large amounts of pension have proven unsustainable. In the past, private pension saving relied on strong investment returns, mainly from the stock market, to forecast generous future pensions, which would grow from relatively small contributions. The magic of compounding was supposed to deliver good pension income, but this has not materialised in private defined contribution schemes and has proved unaffordably costly for most employers running defined benefit schemes.

    When thinking about saving overall, it is very important that the concept of pensions is clarified. At the moment, there is confusion between the role of the state and role of private saving. The state pension system relies on mass means-testing, which penalises people who have saved for their retirement. That is not a sustainable way forward.

    It is important, in my view, that the state pension should provide just a minimum social welfare base, payable to older people (but the age from which this starts to be paid cannot be set in stone and must be adjusted to fit developments in society over time). If people know there is just this minimum level, and if they want to have more than that in retirement, they will know they need to find extra money from somewhere. Whether that comes from their own savings, employer savings plans, housing, a business, an inheritance or some part-time work at older ages, they will know they need more money and should not be penalised by the state for providing for themselves. Therefore, we need to rid the state pension system of the reliance on means-testing and ensure that people recognise the need to save.

    However, we should not have unrealistic expectations of the returns that savings can deliver, nor be misled into thinking that returns can be guaranteed, even in the long-run. People need to understand that saving alone will not guarantee a good pension.

    As people are living longer and longer, the amount of savings either needs to rise sharply, or people must retire later in order not to keep extending the number of years their pension has to last for.

    Investment return forecasts have, in the past, been far too optimistic. Saving for retirement requires saving a sum of 20% or more of salary every year for many years, in order to have a chance of a good pension. For a final salary type pension, the sums are more like over 30%. This means that most people will simply not be able to save enough for a good pension and will need to either think about working longer so the pension lasts fewer years, or having a lower income in later life, or a combination of the two.

    As regards independence, many older people can live well on their own nowadays. With advances in telehealth and telecare, as well as people being stronger and healthier, many older people can now stay independent in later life. Housework is much less physically demanding and care in the home will provide a much better lifestyle, if help is needed, than moving into a residential care setting unless this is absolutely necessary.

    3. Do the extent and nature of public services need to change? If so, how and how should they be paid for?

    Public services are not always quick to adapt to demographic realities. In fact, the care of children has improved significantly over the years, however care for older people has actually very often deteriorated recently. Council budgets are being cut and, as increasing numbers of very much older people need some care, councils are having to cut back the amount they spend on each person’s care, and on the services they provide.

    It would be enormously helpful if councils and Government were to plan over the longer term for the needs of the aging population. Councils are not required to produce 5-year or 10-year plans as to how they will cope with increasing numbers of older residents in their area. They do plan for rising numbers of children, but that is not sufficient to adapt to demographic developments.

    Social care is the biggest problem in local public services for older people. The country has not prepared people for supporting themselves well in later life and the welfare state does not really cover care, because it was designed over sixty years ago, when the two big problems for older people were considered to be health and pensions. In those days, people died younger and, if they were ill, they did not live for years in chronic ill-health. As life expectancy has risen and the baby boom generation has grown older, we should have been preparing for the new future which is rapidly approaching. Sadly, we did not.

    There is almost no money set aside for social care of increasing numbers of frail older people. Whether at public sector or private sector levels, funding for care happens on an ad hoc basis, rather than being budgeted properly and planned accordingly.

    It is important that we start to fund care needs, in combination with consideration of our health spending, and also that we encourage private individuals to realise the need to have some money set aside by each family, in case one of them needs costly care. If there is money put aside, then should care needs arise, this will be less of an emergency expenditure need and more of a planned purchase. Incentives for care saving plans, with families being encouraged to join together to fund care in a tax free savings environment such as an ISA, would be a good start.

    We need a partnership between the state and the individual family, so people know what they can expect the state to provide and what they need to do for themselves.

    4. Do we need to redesign and transform public services for these challenges? If so, how?

    Greater emphasis on care in the home, rather than in hospitals or residential care homes is required. Building more retirement villages, community housing that older people may want to move to but can still live in on their own. Housing developments suited to older people, who like having gardens, need entertainments, clubs, medical or fitness facilities as they get older are not really being built, but are much needed. Public health services should be redesigned to focus on preventing people from needing long-term care, staying fit and healthy in their own homes. Checking people’s homes for safety, as well as having medical check-ups can be equally important to prevent ill-health. Handrails, fixing loose carpets, ensuring there is proper lighting – all minor items that can prevent falls and hospital admissions or broken bones which end up costing so much to the health service.

    5. What should be done now and what practical actions are needed?

    We need to ensure there is a national debate around how to deal with the aging population. This could include:

    • Highlight examples of people who are finding fulfilment working in later life, but in a part-time capacity.
    • National awards for those helping others to cut down their working life, plan to work part-time or retrain.
    • Encourage employers to keep older workers on part-time if they want to.
    • Start a national plan for how to ensure suitable housing and adaptations for housing to become age-friendly.
    • Start a national information and education campaign to encourage people to take the small steps needed to age well and to explain the social care system.
    • Introduce incentives to help people save for their later life care needs.
    • Consider a cross-departmental approach to helping improve older people’s lives.
    • Provide free information via the NHS on benefits of adapting homes for safety to prevent falls and benefits of some care in the home as preventive measures.
    • Incentivise financial and lifestyle planning from mid-life onwards, to help people fulfil their own potential, plan the future that fits their own lives best and understand all the options that might be open to them, so they can make the best personal choice for themselves.

    6. How can we stimulate national debate about these issues?

    The Committee inquiry itself is very welcome in this regard, to help focus media attention and debate on this important issue.

    Saga is trying to do what it can too, to lead the debate on the issue of healthy aging, and demographic change. We are holding our Saga Thought Leadership seminars, our Quarterly Reports which form a ground-breaking research series helping to shape the debate around how the lives of Britain’s 21million over 50s are developing. We also regularly issue other public information materials, as well as conducting research and engaging with the media.

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