People living longer is a huge problem for governments and health services across the developed world.
As diet and medicine improves, more people are reaching beyond 80 years of age – and into their 90s and 100s.
The new report A Piggy Bank For Welfare reveals that today that Britain has 28 retirees for every 100 of the working age population.
By 2064, which is less than 50 years, the number will shoot up to 47 retirees for every 100 workers.
The report by think tank the Insitute of Economic Affairs (IEA) argues pressure on health and social services is no longer excused by accusations of poor financial management or unhealthy lifestyles but simply the need to look after more elderly people with medical problems that are expensive to treat.
The equation is not helped by falling birth rates.
Funding shake-up
The combination means more retirees relying on fewer workers to generate the taxes to fund their state pensions and health care.
For retirement savers, living longer means saving more.
For the health service, the IEA believes a radical shake-up of how the NHS is funded is needed with money invested to provide revenue to run hospitals and to pay for nurses and doctors.
Report author Kristian Niemietz, the IEA head of health and welfare, said: “The NHS, like almost all Western healthcare systems, is a fair-weather system. It is currently financed on a pay-as-you-go basis, which means that it never builds up any reserves.
More taxes or borrowing does not work
“This worked just fine at the time the system was created, because Britain was then a relatively young population. But it is not set up to cope with an increasingly ageing population. Healthcare costs rise exponentially in old age, and life expectancy is rising, while birth rates are low.
” The average healthcare costs of people over the age of 85 are more than five times higher than those of young and middle-aged people.
“We cannot just keep increasing taxes or borrowing forever. Something will have to give. Ideally, governments should have started building up an old-age reserve fund for future healthcare costs years ago. This can still be done, and the sooner, the better.”
The IEA is an independent research body and charity that looks at the roles of markets in solving economic and social problems.
