Who will fund your retirement? Is it: a) you, b) the State, c) nobody
Increased longevity is highlighting a range of problems from pensions to healthcare
Living longer is frequently presented entirely in negatives such as “pensions time bomb” and projections of a society too old and infirm to take care of itself. Photograph: iStock
We are living longer than at any point in human history and if we can just avoid any Twitter-fuelled nuclear apocalypse over the next three years and 11 months or so, our life expectancy will most likely get longer in the decades ahead.
As many as 50 per cent of five-year-olds in Tokyo will live to blow at least 115 candles out on a birthday cake, and the same percentage of Irish children who were born in the past decade will make it to 100.
There is even likely to be a woman somewhere in Ireland who has already started drawing her pension who will be drawing it until after she celebrates her 120th birthday. That woman might even be you.
Living longer is a good news story but it is frequently presented entirely in negatives such as “pensions time bomb” and projections of a society too old and infirm to take care of itself.
While pensions are problematic and the spiralling cost of healthcare – and the inadequate State supports – create difficulties for many, living longer is, on balance, better than the alternative, and we might be well advised to stop thinking of ageing as a bad thing to be blamed on older people whom society deems useless once they pass a certain date.
From most consumer perspectives, it makes economic sense to change the narrative. The over-55s represent 70 per cent of the wealth in the European Union and 80 per cent of the wealth in the United States. They buy more toys and consume more of almost all other goods than younger generations and they have more purchasing power and less reluctance to spend the money they have.
In other words, they are ideal consumers, yet they tend to be ignored by most ad companies and marketers, who tend to be obsessed with youth.
Anne Connolly is the chief executive of the Ireland Smart Ageing Exchange, an independent network of businesses, academic institutions and government agencies developing and launching products targeted at the global smart ageing economy, so is well-placed to talk about how we need to reframe the conversation about our ageing society and the costs it comes with.
When it comes to managing the cost of ageing, the most important thing, she says, is for people to maintain good health for as long as possible. It seems obvious but it is worth highlighting nonetheless.
Sometimes good health is blind luck but more often than not we have some control over where the dice falls. If we all exercised more, ate less sugar, quit smoking, drank less alcohol and reduced our stress levels, we’d all be a lot better off for a lot longer.
Some costs, such as pensions, are harder to avoid. Connolly believes the end of mandatory retirement is overdue and she believes people will just have to accept the need to work longer than is currently the case.
That acceptance is long overdue. A retirement age of 65 – or even 69 – has no place in the 21st century, not least because the 65-year cut-off point is almost entirely arbitrary and dates from Bismarck’s day when, to reduce popular discontent, the Iron Chancellor agreed to introduce a state pension at 65, knowing full well that life expectancy was less than 65.
But people heading towards their mid-60s today can reasonably expect to live for 30 more years. That does cause problems. Before the crash there were six people working for every one person in retirement. By 2050 there will be only two people working for every retiree.
“I think we will have to see an end to mandatory retirement in Ireland soon,” Connolly says. “When that happens change will come very quickly. There will be more gradualised retirement and more retraining for encore careers, and you might see somebody who has worked in banking for 40 years moving into teaching, for example. What we need to be thinking about as a society is the 100-year life in which the whole nature of the workforce changes. Our mindsets will have to change and that is a slow and gradual process,” she continues.
For all its flaws, private pensions are a key part of the puzzle as the State will not fund an adequate lifestyle for all the retirees in the future – it doesn’t even do it now.
The State pension is now €230.30 a week, but if someone wants to spend their golden years travelling the world and doing all the costly things they put off earlier in life, they will need more than that.
The National Pension Policy Initiative of 1998 is dated but still a good guide to how much someone needs in retirement and how much it might cost to get to that point. It suggested an “adequate” gross retirement income of 50 per cent of gross pre-retirement income, so a person who wants a retirement income (including the State pension) of €30,000 needs an annual private pension of €18,000. That will require a fund of €350,000. And that comes at a cost.
Someone who starts a pension at 25 will need to save €238 every month. A person who starts 10 years later will have to find €432, while someone who puts off their pension until 45 will need to put €864 into their pot every month for 20 years to get to that number (which is based on 6 per cent growth per year).
Pensions aside the other big cost is how to care for an ageing society. An excellent Brendan Courtney documentary about finding care for his ageing father was broadcast on RTÉ in January and started a national conversation and highlighted the difficulties people have accessing and paying for care in the home.
“It is easier to get the Fair Deal scheme than a home care package despite the fact that the home care package often costs half the price and has better outcomes,” Connolly says. “We need to put it on a statutory footing and merge the funding for both the Fair Deal scheme and the Home Care packages so that the money is coming from the same source rather having to separate disconnected pots.”
The Government spends about €940 million each year on Fair Deal and it caters for about 23,000 people who pay a combined total of about €200 million for their care. Just under 17,000 home-care packages are provided, with a typical package of support available under the scheme worth €350-€500 a week.
On paper the home care package looks great but in reality it is anything but. It is not an automatic entitlement, for a start. It is hard to access, fraught with difficulties and some authorities plead ignorance when contacted for information – at least according to one reader who contacted us last week.
For older people who need care, one option is private operators in the space. Home Instead, Bluebird Care and Care for Me are all such services and they all charge €22-€27 an hour for care, with some offering discounted rates through the night. Care For Me, for example, charges €170 for a 10-hour stretch overnight and €22-€26 an hour for home care depending on the level of care required.
People can avail of income tax relief of up to 40 per cent on up to €75,000 a year, which means the €170 falls to just over €100 and the €22 rate falls to just under €13. If you arrange services or supports above the levels provided by the Health Service Executive, or if you do not qualify for a home care package, you will have to pay for the cost of those services yourself. So if you were paying for 14 hours of care privately, it would cost about €30,000 a year when the tax breaks and the grant are factored in.
Anna McCabe knows from first-hand experience that while people always talk about the desirability of care in the home, it is not always practical. Her mother required nursing-home care after developing dementia and her father could not manage independent living after developing a severe disability in his late 70s. “If professional care is required round the clock, then home care is much more expensive than nursing home care,” she says.
“Apart from the cost, care of a profoundly physically disabled person in a typical semidetached modest house is simply not practical. It is not just that minor adaptations are required. Rooms are not big enough for specialist chairs, hoists and other equipment needed.
“Furthermore, the presence of professional carers in the home 24/7 bring other dynamics that can cause problems people don’t always realise in advance. They need somewhere to take a break, etc. They may need a bed if staying overnight. It is an invasion of family privacy exacerbated by the high turnover of staff so that you rarely get the same individual for a prolonged period of time. Many have poor English, which also contributes to this difficulty. While these issues may seem minor, over an extended time period they can become hugely burdensome.”
She says that how we care for older people as a society is a conversation that needs to be had . However, just repeating the mantra that “people want to stay at home” without exploring the nuances involved is not the answer either.