Retirement planning has to keep pace with medical advances. JOHANNESBURG – A child born in the US today is more likely to live to a 100 than to be born with blonde hair or blue eyes. But while advances in technology and medical breakthroughs mean living beyond a 100 has become a reality it has significant implications for an international retirement industry that has not quite kept pace with innovation. Speaking ahead of the launch of Sanlam’s Benchmark Survey on retirement later this month, Viresh Maharaj, chief marketing actuary at Sanlam Employee Benefits, said although longevity has always been part of the retirement funding landscape, research indicates that the nature of longevity is not fully understood, appreciated and anticipated in current retirement planning. Maharaj said life expectancy has increased by 20 years since 1950.
This is a larger increase in the last 60 years than in the 6 000 years that preceded that. This dramatic surge is largely due to advances in medical technology, nutrition as well as public health systems. “The fact that we’re able to access the kind of medicine we do today, the kind of food we eat today, the kind of doctors we have today means that we as a global population are facing a much longer lifespan than our grandparents or our great grandparents could have dreamed of.” And the increase in life expectancy is not anticipated to slow down any time soon.
The United Nations (UN) anticipates that for the next 50 years there will be a 1.2-year increase in lifespan every decade. By the year 2035 it expects the current population figure of 600 million people over the age of 65 to grow to 1.1 billion. Change In the context of retirement planning, this change in longevity is shifting the goal posts. What worked when retirement funds were conceptualised and implemented may not necessarily work today and may definitely not work in 20 years’ time, Maharaj said. The impact of longevity also means that people need to save more for retirement or spend less time in retirement. While people generally don’t control at what age they die, the retirement system has to reconsider at what age people are retiring. Maharaj stressed that it is important for the retirement fund industry to understand and anticipate changes in longevity, as it will affect financial security.
It also has to be aware of the changes in medical science in order to structure a system that will stay relevant for a prolonged period of time. Science fiction becomes fact Maharaj said apart from ongoing improvements in the field of medical research there are also other new strains of research that will affect longevity. One of these is stem cell research, which allows for growing tissue based on a person’s particular genome. The aim of stem cell research is to be able to provide a mechanism to grow tissue that can replace organs. Stem cell research has applications to address cardiovascular disease, cancer, Alzheimer’s, arthritis and other diseases that are tissue and cell based. Another area of advancement is nanotechnology, which could be a revolutionary concept in advanced medicine.
Nanotechnology is the use of tiny microscopic robots by physicians to perform surgery on cells and can for example be used to replace defective chromosomes. Scientists predict that the first implementable version of these nanorobots will be ready by the mid-2020s, he said. Alignment It is important for the retirement funding structure to align itself with these changes to avoid becoming obsolete. In the South African context the impact of anti-retroviral medicine on HIV as well as the potential impact of the National Health Insurance on longevity has to be considered. Maharaj said South Africa also faces a different dynamic – the sandwich generation.
This is where individuals retiring today face the prospect of having to support their children and their parents who are living longer. According to this year’s Benchmark statistics, 60% of pensioners have adult dependents (1.2 dependents on average) and 23% have child dependents (2.5 dependents on average). Maharaj said the South African retirement funding industry, which includes the providers of retirement products, government and employers, has to start thinking creatively in order to align itself to be relevant. He said employers could play a critical role by considering an increase in the retirement age. The first retirement fund was conceptualised in 1881 in Germany and had a normal retirement age of 65. At the time it made sense because the average life expectancy of the German worker was 45. Only the rare individual made it to retirement. If people start saving earlier and the retirement age gets pushed out, it can go a long way in addressing the problem.
This article was first published on MoneyWeb: