Elderly with foresight will pay for myopic millions

Government concern over the cost of ‘excluded’ elderly is at odds with the free market dream. No one said those who save must pay for those who don’t.

I’m confused. And I think it’s my age. Just when I thought I was approaching the golden era of my second half-century, during which I would be a prime target for marketers of premium products and services, I’m told there are too many old people around. Apparently, two-thirds of over-50s who leave work are forced to do so, and the majority are on what are called low incomes.

So says a Cabinet Office report published last week. From it, we learn the Government is to give priority (whatever that means) to the 2.8 million 50- to 64-year-olds who have quit the labour market. We’re told that their actions are reducing economic output by two per cent a year – or about &£16bn.

True, that’s only two-thirds of the sum that Chancellor of the Exchequer Gordon Brown has just raised from the auction of the new, second-generation mobile phone licences, but it’s still a dent in the economy. Not only that, but the report suggests the problem will worsen over the next 20 years, when as many as 4 million over-50s will be out of work (if present trends continue).

The Prime Minister doesn’t mince his words in the report’s introduction: “Most people leaving work early are not doing so voluntarily; many are poor; many feel dislocated and excluded. There will be huge social and economic costs if present trends go unchecked.”

This is bewildering to me. I, and many others, have been led to believe that a veritable economic bonanza awaited, as the generally affluent over-50s – the products of the post-war Baby Boom which were not culled by a subsequent war – found they had disposable incomes and new leases of life in which to spend them.

The next generation have left home, the mortgage has been paid off and you’re looking at upwards of 30 years in which to consume the fruits of a free market economy.

The socio-demographic acronyms told it all. The “Yuppie” (young, upwardly-mobile person in professional employment) married and became a “Dinky” (dual-income, no kids yet), struggled through the “Sitcom” years (single-income, two children, oppressive mortgage), went “Pepsi” (post-ecstasy, pre-senility) and is now either a “Soppy” (sensible older person with pension and insurance) or “Swel” (senior citizen with energetic lifestyle).

In the US, wired over-50s are known as “Silver Surfers” – very much the target of e-tailers looking to down-load their cash. I gather this market is also called the “Grey Panthers” – a title I like so much I intend to use it as my byline when I turn 50 in 2005.

The marvellous thing about this market, we used to be told, is that it doesn’t depend on entrepreneurial talent, or even much diligence. People have been getting rich by accident. Property inflation and, particularly in the US, a protracted bull market in shares have made the middle aged and elderly prosperous, as if by right.

As I understood it, the implications for the marketing departments of premium goods and services companies have always been obvious. Indeed, only last week market researchers at Verdict advised retailers to abandon their fixation with youth, as an ageing population demands quality more than fashionable brand names.

According to Verdict, the new “generation of greys” (sadly, there is no mention of panthers) will have no concept of the frugality of the war and post-war years, rather they will remember “the boom times of the Sixties and Eighties”. Of this new generation of older consumers, Verdict says: “They are affluent, demanding and very poorly catered for. The prize is very significant. The penalty for trying to adhere to the old order could well be terminal.”

They are somewhat different to Tony Blair’s “dislocated and excluded”. For him, the prospect is not so much of Swels but Dumps (destitute, unemployed, mature professionals). I’m tempted to say they – Verdict and the Cabinet Office – can’t both be right. But, of course, markets are not about generalisations; there is room for both views.

Verdict’s Grey Panthers will have to pay for Blair’s Dumps, through both direct and indirect taxation. That already begins to take the edge off the golden age of affluence. Add to this the burdens that pension provision places on the state and financial services industry and the picture is less than rosy.

Furthermore, some of the actions flagged up last week by the Government’s consultative paper seem to be aimed at cooling the affluent over-50s economy. For example, there is a proposal to raise the minimum age at which a pension may be drawn down from 50 to 55. It means that those of us who are lucky enough to have been able to stash away enough lolly to enjoy a tax-free lump-sum won’t be able to spend it as soon as we thought, or with quite the same vigour of relative youth.

The answer has to be more tightly-targeted marketing than has been widely anticipated. A model might be the excellent Folkestone-based Saga Group, through which products and services walk off the shelves to the over-50s. But anyone who thinks marketing to the “New Retired” will be easy had better start revising their plans – not to mention their pension planning.

George Pitcher is a partner at issue management consultancy Luther Pendragon

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