We tend to view the ageing of our society as a worrying thing. Rathbone Income Fund co-manager Carl Stick favours a more positive spin that recognises that greater longevity gives us longer futures, widening our options to work, spend and save.
Live long and prosper?
Remember that old line about “you know you’re getting older when the police start to look remarkably young?” Something rather different has been happening to me lately. I’ve noticed quite a lot of London’s workforce is looking, ahem, more mature.
In the supermarket, at the coffee shop and even in the world of investments (where, believe me, anyone over 35 is routinely described as an ‘industry veteran’!), I’m seeing more less-youthful faces.
We know the pandemic nudged a lot of people into early retirement . But the latest UK jobs market data showed that the number of people out of the workforce (or ‘economically inactive’) had fallen sharply in the last few months. And it revealed that biggest drop was evident among older people.
Are early retirees flocking back to work because inflation has eroded their savings so much that they’ve realised they’ll need to work for longer to keep themselves afloat in retirement? That does seem to be happening. But something much more positive also seems to be under way.
Could it also be that older workers are being lured back to work by the more flexible working opportunities that are now widely on offer? And could they also find they’re being better rewarded and valued by employers trying to fill the UK’s yawning jobs and skills gaps?
Many of the companies we invest in tell us they’re actively trying to recruit older workers to fill their many job vacancies. Auto service and bike retailer Halfords, for example, has launched several initiatives aimed at encouraging older people, including those who’ve retired, to retrain with them for second careers as auto technicians. Its Retyrement Plan (get it?) offers a lot of flexibility about the hours people need to work and – in what’s believed to be an industry first – a later life apprenticeship scheme for the over 50s. Halfords argues that technicians’ work has grown less physically demanding as digital technology has taken hold across the auto industry. As a result, technician jobs are likely to appeal to a wider range of age groups.
While some jobs have certainly become more age-friendly, it’s also true that many of us (if we’re lucky) are living longer in better health. Professor Andrew J. Scott, founder of The Longevity Forum think tank, argues that we shouldn’t regard ourselves as an ageing society, but instead as a “longevity society”.
He believes we’re focusing on the wrong things by worrying about changes in our population structure (more older people, fewer younger ones) and how a smaller young workforce can afford to support a bigger number of elderly dependents. Instead, Professor Scott thinks we should shift the spotlight over to the extra time that health longevity can bring and how that could impact on a lot of our decision-making. It will have big implications for exactly when we may choose to learn, earn, consume and save. It may well allow those of us who need to, are able to, and, most importantly want to, to work for longer. If the number of older workers keeps increasing, older generations will be able to contribute more and depend less on younger ones to fund their retirements and old age health care.
Traditional portfolio disciplines that shift our money away from risk assets (i.e. equities) as we get into our sixties, investing more in bonds and cash-like assets, just don’t fit the bill any more. If we’re living longer, working for longer and consuming for longer, and we know that our savings pots need to be bigger to finance our longer lives, we also need to be taking on more investment risk in our later years - or at least recognise that it’s important to be growing capital beyond our sixtieth birthdays.
As the co-manager of one, I’ve long argued that an equity income fund can be just the right vehicle for people wanting to take on equity risk as they approach retirement because it allows them to harvest the income it generates once they retire. That argument is timeless and still stands. However, in a world where we all may be slipping in and out of employment for many years, taking time out to retrain and then going back to work again, the arguments for an investment vehicle that proffers the chance of both capital and income growth look even more compelling. Here’s hoping more and more of us live long and prosper…