Longevity and financial aspects

The financial needs of the growing group of older people are different from the rest of the population in three key respects:

• First of all, the burden it represents for families and for individuals themselves, since in many countries they are the ones who have to pay the cost of their treatments in whole or in part. It is something that has been identified as the malus of longevity and, for them, banks would have to develop products such as long-term savings plans or specific financial planning services.
• The elderly often have their savings invested in housing which, with the help of banks, could be used to finance their future needs.
• The third point of interest is the complementarity of pensions, something that can be defined as the fact the increase in retired people will reduce the sustainability of the public pension system. In this sense, the debate has changed in recent years, and has gone from focusing on a possible increase in these pensions to the evaluation of their reduction so that they remain viable.

The population can be divided according to their salary and not all of them are affected in the same way by the issue of pensions. As explained Dieter Staib using  -a little extreme, but representative of what happens in many other countries-, a very small percentage -about 3%- of the population has very high salaries, another also very small – 4% – earns very little, so his pension will be similar to his salary. These two extremes will be less affected by the impact on financial services of greater longevity; things for them will remain the same. But what about the intermediate group, which represents 25% of society and is made up of people with a reasonable salary who will receive a pension – even if it is the maximum – much lower than this? Even taking into account the reduction in expenses that usually accompanies retirement, of around 20%, there is still a gap of 30% that will have to be paid in some way.

Saving

A logical way would be, in principle, to encourage savings, but we live in a context that is ruthless with savers. This would be an individual economic challenge, but there are also collective ones, such as the application of the sustainability factor when calculating pensions; this parameter is calculated by life expectancy at the time of retirement and with its increase, the monthly amount of the pension is reduced, especially the largest.

Staib  points out that many banks are already concentrating their actions around three key moments of the aging process:

• The first would be preparation for retirement, around age 50. People in this group may still be subject to very high financial pressure: not having finished paying for the house or still having their children in their care. What can banks do for them? Make them understand what the financial reality of their retirement will be and offer them banking products that they can afford and that help them save.
• The second moment is the so-called active retirement, in which banks have to help their customers so that their savings are not reduced too much.
• Finally, there is the passive retirement, the moment when people continue to be retired for practical purposes, but they require a lot of help, especially because of health problems. Still banks have a role to play there can serve as a point of contact with many services that retirees need.