Demographic dividends, corporate challenges
Increasing life expectancy is one of the most profound success stories of the post-war era. The pace and scale of this human success story has been remarkable, but it is creating its own challenges for corporates.
The average boy born in the UK is now expected to live for 79 years – 8 years more than in 1980
Arguably the most high profile challenge for companies is addressing rising pension deficits. Defined benefit (DB) schemes typically promised their members a proportion of their salary for the rest of their lives upon retirement - regardless of how long the member lived.
The average boy born in the UK is now expected to live for 79 years - 8 years more than in 1980, equivalent to an increase in life expectancy of almost three months for every year that’s passed (Source: ONS).
Rising liabilities as a result of increased longevity, exacerbated by lower interest rates and weak asset returns have required corporates to pay more into schemes. According to the ONS, employer contributions for defined benefit schemes are currently around £37bn per annum, having been just under £10bn in 2000.