Irish Life highlights impact of Ireland’s ageing population on pensions and healthcare

  • Only 28% of those working have a financial plan for retirement
  • Increase in over 65s will require extra public beds equivalent to 3 new Beaumont Hospitals

Ireland’s population of over 65s will grow by 200,000 over the next ten years. The implications of this ageing population for retirement and healthcare was discussed by Irish Life at a recent media briefing looking at trends in the pensions, investment and health insurance sectors.

David Harney, Chief Executive, Irish Life Group, said that Irish Life actuarial research confirms that life expectancy is on the rise. “Our analysis shows that half of females currently aged 65 years have a 50% chance of living beyond 91, and as many as 25% are likely to live beyond 97 years. For males, aged 65, the figures are lower with half expected to live past 87 and 25% beyond 93 years. However, financial planning for retirement is not keeping pace with these longer life expectancies,” he said.

Many life events, such as getting married and having children now happen later than previously, including saving for retirement. In 2016 the average age at which individual Irish Life customers first purchased a pension was 44 years, almost 10 years older than the average age in 2000.

(Pictured here are David Harney, Chief Executive, Irish Life Group, Denis McLoughlin, Managing Director, Irish Life Retail, and Tony Lawless, Managing Director, Irish Life Corporate Business)

New market research findings* on how the views of people already retired compare with younger customers still saving for retirement were presented by Denis McLoughlin, Managing Director, Irish Life Retail.

An analysis of spending in retirement showed that almost two thirds of people had reduced spending power compared to when they were working; one fifth spent the same and 15% increased their spending in retirement. When asked would they have prepared differently, 63% of those with reduced spending said they would have changed the way they planned their future finances had they understood the impact of reduced spending on their retirement lifestyles,” he said.

In contrast, only three in 10 (28%) of those not yet retired have a financial plan to help them prepare for retirement. Surprisingly, given its importance for later life, only half of those under 50 years of age had ever discussed financial retirement plans with their partner. As retirement age approached this increased with 75% of those ten years or less from retirement saying they had discussed plans with their partner. The financial issues which people expect to have to deal with in retirement include supporting both their children and their parents, and paying off debt.

Tony Lawless, Managing Director, Irish Life Corporate Business, spoke of how Irish Life is working with companies to encourage employees to save more for retirement. “We recommend a target of one third of salary, plus the state pension, for people to enjoy a comfortable retirement. However, 90% of people currently on our Defined Contribution plans are not on track and most people will see a salary replacement of just 18% plus the state pension unless they save more, and start pensions earlier.

We know from our research that 69% of adults say it would be great if people were automatically signed up for a pension at work. This finding was successfully verified recently in an initiative we undertook with a client company. By opting all employees in at the maximum contribution level, pension participation increased from 58% to 90% with the number of employees paying the maximum increasing from 42% to 82% even when they were given the option to opt out.” he said.

(Pictured here are Jim Dowdall, Managing Director, Irish Life Health, David Harney, Chief Executive, Irish Life Group, Patrick Burke, Managing Director, Irish Life Investment Managers)

The briefing also provided the opportunity for Irish Life to discuss general economic themes and trends in investment management. Patrick Burke, Managing Director, Irish Life Investment Managers, noted that 2016 was a positive, but volatile year, for investors. “Clients generally experienced positive market performance with our Irish Property Fund up 11% and the Irish Life Multi-Asset Portfolio Fund (MAPS 4) up 7.7%.”

However, a large portion of retail savers are getting poor returns due to the very low interest rates. Almost half of Irish adults say they have money sitting on deposit, with an average deposit amount of €32,000. But 2 in 3 of these people are unhappy with the returns. This has resulted in the continuation of strong flows into multiple asset category investment funds such as MAPS.

Regarding the investment outlook for 2017, Mr Burke said: “While volatility will remain a feature of global equities markets, positive returns can again be expected. For property investment, there will be Brexit-led opportunities for the Dublin market and further positive rental growth in the retail market.”

Reviewing the impact of an ageing population on the health system, Jim Dowdall, Managing Director, Irish Life Health said that the increase in the population aged over 65 is estimated to require a 42% increase in public beds used by this age group by 2026. This is the equivalent of nearly three new hospitals the size of Beaumont Hospital. Increases in chronic disease will put further pressure on the health system.

“The current model for funding the public and private health system is not sustainable. If we are to create a sustainable health system to support an ageing population, we require a different vision for the future”, he said.

Mr Dowdall proposed three areas which should be addressed: a strategic vision incorporating the public and private system; a focus on costs and changes to the funding model, and ensuring a sustainable community rated market.

The level of private funding for the Irish health system is significant, accounting for 31% of the overall €19 billion annual expenditure.