"We are living in the midst of the most remarkable demographic transition in history," Bank of America Merrill Lynch has said.
In a thematic investment note sent to clients in May, titled "The Silver Economy — Global Ageing Primer", the investment bank said life expectancy is expected to reach 77.1 years by 2050 compared to 48 years in 1950. This means ageing is set to become a universal phenomenon, with the global population of people above 60 years set to grow to 2.1 billion by 2050, compared to 901 million currently.
"Global ageing is one of the greatest transformations of our time," the note said.
According to report, more than 80 per cent of older people will live in emerging markets. China will see the number of over-60s jump from 209 million (15 per cent of the population) today to 492 million (36 per cent) by the middle of the century, according to estimates from Bank of America Merrill Lynch. Public finances are likely to be put under strain by a surge in retirees.
Risk underestimated
Preparing for this demographic tidal wave is a pressing imperative for governments, businesses and individuals alike as people outlive assets. "It will be one of the most significant challenges facing retirement systems over the next 50 years, with global annuity and pension-related exposure estimated to be as high as $15-25 trillion. Many countries could be facing additional costs of up to 50 per cent of 2010 GDP by 2050," the report said.
Quantitative easing and low interest rates are exacerbating longevity risk for the one in five corporate pension funds that are already underfunded. Individuals are also inadequately prepared for the coming crisis, with nearly two out of three employees globally not saving for retirement. Women, the young, and poorly educated are at greatest risk, the report said.
Put simply, there isn't enough money for all these new retirees.
The silver lining
The spending power of 60+ consumers is expected to reach $15 trillion by 2020 and the longevity sector alone is expected to account for over 50 per cent of US and Japanese GDP by the 2030s. However, there are pressing challenges concerning wealth inequality, those on low incomes, women and the elderly in emerging markets, the report said.
