Aging and changing demographicsOperating environment

Our influence and control

The world is getting older. By 2050, according to the UN, more than 1.5 billion people will be aged 65 or over, up from approximately 600 million today. Former pay-as-you-go pension systems, particularly in Europe, are under severe strain. This means individuals will have to take more personal responsibility for their retirement. And with life expectancy in many places at 80-85, retirement savings have to last much longer than they did a generation ago. Aging has also led to a shift in attitudes. In the US, Europe and parts of Asia, many expect to work longer and, in some cases, not to retire at all. As individuals, we're becoming more flexible, and more likely to see retirement as a new, active and exciting phase of our lives.

Our risks

Generally, as people get older we pay out more in pensions and other benefits. This longevity risk is a natural part of our business. As well as our pensions activities, we also have long-term care in the US. Our customers may spend thirty years or more in retirement, and we have to meet our commitments to them during that time. To plan and price our products, we make assumptions about life expectancy. Any underestimation has an effect on our earnings and, ultimately, on our capital position.

Our opportunities

In many markets, aging has led to increased demand for certain products, particularly those that help manage assets and savings after retirement. There's a growing need for healthcare and social care, as people inevitably experience the health problems associated with old age. We're also seeing changes in legislation. In some countries, governments are phasing in higher retirement ages; in others, they're taking steps to free up the market for atretirement products – in the UK, for example. These changes may bring new opportunities for providers like Aegon.

What we're doing about it

We've been reducing the risk to our business from increasing life expectancy. This has been partly through financial products like longevity swaps, partly through divestments. In the UK, for example, the sale of our annuities business led to a significant reduction in longevity risk. We're also offering new products and services – like Managed Advice in the US, which helps our customers manage their investments and savings during longer retirement and at a time of low interest rates and market volatility. In the UK, we introduced flexi-access drawdown to take advantage of new pension legislation. At the same time, we're making targeted investments – in care homes for the elderly, for example, in both the UK and the Netherlands. In the UK, we have a £70 million fund investing in healthcare. We're also putting more into research through the Aegon Center for Retirement and Longevity. Age-proofing society is an integral part of our new Responsible Business approach.

Most of the world's pensioners live in middle income countries
(Estimated population 65+ in millions)
The population of over 65s is growing in all parts of the world, but most of the increase is taking place in middle-income countries.

The pension burden is heaviest in high-income countries, but growing elsewhere
(Old-age dependency ratio – proportion of over 65s vs. working-age population, aged 15-64) Workers are supporting more retired people than ever before – this is particularly true in high-income countries.

Source: UN World Population Prospects, 2017.