FIT FOR LONGER WORKING LIVES?

Many of us (if we’re lucky) are living longer in better health. Unless you’re one of the lucky few to retire on a decent defined benefit company pension scheme, living longer will probably demand working for longer. Whether that’s a good or a bad thing depends on a multitude of factors, many of which are within our control. (You can find more by watching our Longevity Matters videos here.)

In his excellent book The Longevity Imperative, Professor Andrew J Scott argues that we need an ‘evergreen agenda’ focusing on ways to make our population healthier and productive for longer. He believes that’s the only way to generate the resources that longer lives require. 

Healthcare and a longevity society

Challenging many of the negative assumptions around ageing can, and should, begin as early as possible. If you want to be physically able in your later years to lift a small case into an overhead locker on a plane or play on the floor with your grandchildren without worrying about whether you’ll make it back up again unaided, try to invest early in your physical health. If you want to stay financially ‘fit’, the same rules apply.

In healthcare, the headline acts over the last 18 months or so have been the weight-loss drugs, GLP-1 agonists like Novo Nordisk’s Ozempic and Wegovy. First developed to treat Type 2 Diabetes, these medicines have since extended into weight-loss therapy, with extraordinary success. And a ‘space race’ has begun to see who can discover new drug combinations that allow further exploration of the links between diabetes, obesity and other co-morbidities, such as respiratory and cardio-vascular diseases, kidney and fatty-liver diseases, heart failure and many others. These chronic conditions are increasingly prevalent as populations age and might risk overwhelming health systems and economies without medical intervention. 

Modern medicine is excellent at dealing with acute illness, like saving lives in an emergency room. But as our population has gotten older, medicine has had to adapt to focusing on the control or palliation of long-term chronic conditions. Historically, the emphasis has been on treatment rather than cure or prevention. In future, it looks like we’ll increasingly need to be thinking about disciplines that might help us avoid getting ill in the first place. That’s not just preventative medicines, but also lifestyle choices. This creates investment opportunities beyond the pharmaceutical sector.

Winners and losers?

An older, but still productive, society will consume different things, so we must consider the likely winners and losers in retail and leisure. What might be the impacts of lifestyle changes, climate agendas and the fact that an ageing workforce will not likely participate in the most physically intensive jobs? 

If lifestyle is a corollary of longevity, how might this impact on the food and drink industries? Might we want to eat different types of food – and think differently about how it’s produced and sourced? Although alcohol consumption continues to impact global health, the growing popularity of alcohol-free beverages presents both challenges and opportunities for drinks firms large and small. 

Technology will take up a lot of slack from age-related physical limitations. Excitingly, how do you harness the experience of age to the productivity benefits of technological development? If the workforce is changing, the labour market and the jobs within it will also need to adapt.

We’re not, of course, basing our immediate investment decisions solely on these long-term trends. It’s simply not feasible to separate yourself from economics and company fundamentals to that great a degree. On the other hand, thinking about the evergreen agenda helps us recognise the overwhelming importance of personal savings and investment in navigating this fundamental demographic shift. Furthermore, the regulators are also getting more interested.

The Financial Conduct Authority is looking closely at how our industry helps people in later life and has recently completed its Retirement Income Advice Thematic Review. 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, do traditional portfolio disciplines that shift money away from risk assets (i.e. equities) as people get into their sixties still fit the bill? Instead, should we be thinking about taking on more investment risk in our later years – or at least recognising the importance of 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 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.