The ageing population is an unavoidable shift in the world’s demographics. In 2000, for the first time in history, there was more people over-60 than children under the age of five. The number and proportion of older persons is growing faster than any other age group and will surpass 1 billion people within the next decade. By 2050, the number of mature consumers is expected to have doubled to 2 billion. The main drivers behind this global phenomenon – increased life expectancy and declining fertility rates – planted their roots more than 50 years ago. The impact of these two trends on demographics in the developed and the developing world cannot be unwound and can no longer be ignored as it affects the global economy.

Key challenges related to an ageing population

These changing demographics represent risks for society as whole, for companies as well as for governments. This is not a temporary bubble, rather an unprecedented shift in global demographics. One of the most serious consequences of an older age structure is that it undermines existing social security systems. “There is a widening gap between what the governments needs to spend on public services for an ageing population, and the amount of tax revenue it is able to generate from its working population,” Julius Baer analyst Fabiano Vallesi notes. Many countries are trying to stave off these impending problems, notably by raising the retirement age or cutting pension benefits. Another source of concern is that a shrinking number of people in the workforce implies less economic output, resulting in a decrease in gross domestic product (GDP). However, there is a silver lining in these shifting demographics – the emergence of the “silver consumer.” An increasing number of seniors continue to work to some extent after 60, continuing to contribute as taxpayers, and most over-60 are also quite affluent with active lifestyles and an increasingly youthful mind-set and discerning tastes.

A wealthy generation in retirement

With no children left in the household, and an abundance of free time and considerable disposable income, most senior citizens in developed markets are well off, with much higher asset ownerships and savings levels than the younger age groups. Thirty years ago, there were no ‘aged economies’ where consumption by older people exceeded that of the younger generations. In 2010, there were 23 aged economies and by 2040 that figure is estimated at 89. Personal spending carried out by the over-50s in the UK is, for example, higher than that of the under-50s. In the US the spending patterns are similar: Expenditure peaks in the 55-64 age group, tracked by the 65-74 age group. “The reason for this lies in the fact that during an individual’s working life, assets are accumulated, leaving net worth of households to move towards a peak around the age of retirement,” Vallesi explains. “The assets accumulated over the previous years are then drawn down in order to fund further consumption during long and uncertain post-retirement periods.” In the US, the above-55s remain the wealthiest age group and the median income of retirees is continuously rising. The median US household’s net worth rose in the age groups above 65 between 2000 and 2011, while it declined in all other age groups during the same period.

Wealthy silver consumers pampering their health

Silver consumers – defined as older than 60 years – unsurprisingly spend more on health care than any other age groups. Today, those over age 60 already incur nearly three-fifths of total US health-care expenditure. Health-care companies in the wider sense, including tech companies offering robotics helping seniors with their daily tasks to hearings aids and traditional pharmaceutical companies should as a result continue to see greater demand for their products and services in the coming decades. But the silver consumers also spend overproportionately on housing, leisure and recreation compared to the younger generations. Long-term, it is likely that the successful companies of the future are those that understand the needs of the silver consumers. “The challenge for all companies will be to develop products and services that will help fulfil the needs of the ageing populations,” Vallesi adds.

Japan, which has the world’s oldest population with over a quarter of its population age 65 or older, is the leading ‘silver consumer’ market, and as such has conducted much research to better understand the attitudes and behaviours of its older shoppers. Japanese companies are embracing the silver market phenomenon, coming up with product and service innovations.

Further information

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