Ageing workforce could drive up to 50% GIP premium increase

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Group income protection premiums could increase by as much as 50% due to the average age of the workforce increasing, research has found.

Research by Towers Watson found UK companies are facing big cost increases in their employee insurance premiums as the average age of their employees continues to rise.

The company also found a similar link between workforce age and insurance cost for group life assurance cover and private medical insurance.

Towers Watson suggested a change in the average employee age from 35 to 40 could result in a 40% increase in premium costs for group life assurance, with the cost continuing to increase as the organisation's average age rises.

A 40 to 45 average age rise could result in a 50% premium increase and a 60% increase if the average age rises from 45 to 50.

Philip Percival, head of Towers Watson's FiT Age programme, said: "It's no secret that employees are starting to work later into their 60s and 70s and this is having an impact on the average workforce age in many companies. The additional liabilities and costs associated with this shift can take organisations by surprise if they are not prepared.

"Understanding the financial situation of a workforce is very important for companies wanting to gauge if and when older employees are likely to retire.

According to further research by Towers Watson, nearly a quarter (23%) of UK employees currently expect to work until the age of 70 or beyond.

Evidence from the Office for National Statistics (ONS) also supports the view that the UK workforce is getting older.

The Office of National Statistics found at the end of 2011 there were just over 870,000 people aged 65 or over in the UK workforce. By mid-2014 this had increased to 1.1 million and ONS predictions reveal the number could hit nearly two million by 2021.

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