As more people retire later in life, group income protection schemes will grow in popularity, writes Sue Sneddon
The concept of an ageing population and its impact in terms of financial services has been much discussed from a pensions perspective. We live in a society which is likely to find a large proportion of its senior citizens much worse off than they anticipated, due to the massive savings gap which is currently preoccupying much of the attention of the Government.
While plenty of time and effort is being spent trying to work out how to persuade individuals and employers to encourage saving for the future in terms of pensions, the impact of the ageing population on the wider employee benefit market has not yet been explored.
A direct result of the savings gap is likely to be that in the future, individuals will want to work for longer as they may be unable or unwilling to afford to retire at the current standard age. This will have an impact on employers forecasting their human resource expenditure in future years.
An ageing workforce is likely to raise all sorts of implications and challenges for employers and for the employee benefits market as a whole.
The most obvious area is that of sickness absence as it is probable that an older workforce will take more time off through sickness than a younger one. This will make group income protection (IP) schemes an even more attractive proposition for employees and employers alike.
The financial attractions of a policy which covers the individual against loss of income through long-term sickness are likely to be attractive to older people contemplating a longer working life and could prove a potent means of attracting and retaining employees.
In addition to this however, the current generation of group IP policies offer rehabilitation programmes as an integral part of the product.
This helps the employee get back to work more swiftly, thus increasing their prospects for recovery after illness or injury. In turn this also assists the employer in ensuring productivity of the overall workforce is maintained and the costs of long-term absenteeism minimised. Therefore, we are likely to see demand for this type of product increase in the medium to long term.
In addition, we can anticipate a number of product developments to adapt the current style of product offering to the needs of an older workforce.
As the average age of the workforce rises, we are also likely to see an impact on group critical illness policies with the likelihood of greater incidence of critical illness claims.
Another more short-term consideration is the effect of an ageing population on the existing workforce. As people are living longer, the burden of care for the elderly and infirm on the current workforce increases. Employers may have to factor in the requirements of having a larger number of carers in the workforce and their resultant requirements for more flexible working practices, not to mention factoring in the financial impact on employees.
An ageing population presents more challenges than the savings gap alone and employee benefits providers and IFAs should work in partnership with employers to rise to these challenges.
