An ageing population and personal finance: The biggest financial challenge my generation will face

21 March, 2016
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Jordan Hopkins of Marine Academy, Plymouth, won the 17-19 year old category of ifs University College's Young Financial Journalist of the Year Competition. Entrants were asked to write an essay answering the question: What is the biggest financial challenge facing your generation?

Today I will discuss what I think the biggest financial struggle for my generation will be, which in my opinion, is the UK’s aging population. 

There are currently three million people aged over 80 and this is projected to almost double by 2030 and reach eight million by 2050. In 2008 there were 3.2 people of working age for every person of pensionable age. This ratio is predicted to fall to at least 2.8 by 2033. The reason for this is because life expectancy has increased due to better health care, and fewer babies are being born.

Having an increase of elderly people in the community has complications because there will be a rise in the cost of pensions, the need for more services such as more doctor surgeries and health care, and cuts in tax revenue due to not many people being of working age. The need for more health services isn’t good because that is added to the national budget and there are becoming fewer people available to work. This means we will have to focus on immigration to increase the ratio. High levels of immigration would help to balance the demands of the aging population, as more working-age people migrate here, seeking employment. This means that the falling birth rate in the UK is balanced by the increase in immigration, providing more taxpaying workers. 

The biggest financial challenge my generation will face is an aging population..because it will affect our financial planning

People that work, pay income tax which the government use to pay for services such as pensions. When a person retires they stop paying these taxes and start to claim state pension. This is paid by the government by using National Insurance which is what the working population pay. As the working population decreases the population of retired people becomes even greater. The more money that the government are spending on state pensions means that the money they can spend on areas like education and transport will decrease.

Because we are living for longer and with increasingly good health, the requirement to work longer into our old age seems a sensible solution. Many 65 or even 70 year olds are still working not because they have to but because they want to lead an active life. The government is therefore increasing the age that people are entitled to State Pension, so that it will be 68 for both men and women by October 2044. There is a chance that this age will increase in future, because people are expected to live even longer.

Due to the aging population it is unlikely that the government will be able to afford to give out a full state pension. This means that the people of my generation will have to adjust our personal finances because we will need to either save or make investments for when we are at the retiring age. However if we are living longer it means we have to spend money for longer and even save for longer. We could either do this or work into our retirement age.

My generation will have to adjust our personal finances because we will need to either save or make investments for when we are at the retiring age

I think that an aging population is the biggest financial challenge that my generation will face because it means that the majority of our income will be saved or spent in ways to ensure a safe income for our future. This means we will have less money available for us to use in the present, making it even more harder than it already is to get on to the housing market and take out a mortgage. There will also be the additional costs of health care and pensions homes for example that pensioners now will be able to afford using their state pension but by the time my generation are at retiring age we won’t be entitled to full state pension or maybe not even be entitled to anything at all.

This is a good example of the struggles we will face. Jacob is young and wants to buy a car so he can work more efficiently but he is worrying about his pension already and doesn’t know whether he will have a future income. George is from an older generation and is explaining to Jacob that he has retired and is living off very little income. In my opinion if George is living off very little income now from his state pension then when I reach that age it will be even lower.

This figure shows that, in 1901, the largest age group was young children. However, now it is people in their 40’s.

The Office for National Statistics predicts that if trends continue, by 2035 more than one in five people will be aged over 65.
Around 5% of the population is expected to be aged over 85 by 2035..

In conclusion I think that the biggest financial challenge my generation will face is the aging population because we will have to work for much longer for much less money. We will have to start saving from an early age if we want to live off a decent income, because the state pension now is low and when we reach that age there is a high chance it will be even lower. Saving for our pensions will most probably even become compulsory leaving us less money to spend in the present. This will have an impact on every individual in my generation because it will affect all of our financial planning.

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