Ageing Society: New Opportunities

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Ageing Society New Opportunities? Peter van
Leeuwen ING Netherlands, Director
Institutions 30 November 2006
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Top 20 financial institutions in Europe
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Demographic development 1900-2000
The Netherlands
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Ageing Society Working less hours
Full jobs in no. of hours, The Netherlands
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Ageing Society European Population (mill)
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What does Silver Europe bring us?

• Workforce crises
• Diversity
• Defensive attitude
• Exploding healthcare costs
• Financing gap

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Workforce crises

• Braindrain in 5-10 year (retirement
  babyboomers)
• 77 will consider staying at work (USA)
• Healthcare will demand
• more people
• Fast growing service industry

• Life expectation babyboomers from 77 to
  85-95 years old
• Flexible contracts, career switch,
• working week 2-4 days, projects
• Fiscal stimulation
• Fast growing involvement of 55 in volunteer
  aid (community) in healthcare, culture,
  sport, ..
• New entrepreneurs

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Workforce crises ? Financial instruments

• Need for other financial services for experienced
  starters and others
• Support flexible labour contracts and personal
  responsibility
• Electronic (payments) devices that are really
  user friendly
• Small business facilities and loans

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Diversity

• Population diversity
• Working population changes
• More entrepreneurial appetite
• Business transfer

• 03 10 non-European ethnic origin 50
  50 will be
• 2/3rd share non-dutch in increase working
  population till 20
• Diversity in personnel and education
• No. of starters decreases No. Of non-European
  starters triples
• 20.000 or more in next 10 years Possible match
  with non-Europeans

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Diversity ? Financial instruments

• Rapidly growing market for financial products
  anticipating new demands
• Family oriented financing of business transfer
• Less traditional life insurance but flexible
  asset financing
• Anticipate new demands

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Defensive attitude

• Investment horizon is much shorter Less to
  loose in service industry
• Where are the youngsters to challenge to
  present status quo?
• Call for more regulation and control
• Investments will go to powerhouses in (Far)
  East

• Less competition means less innovation?
• Evolution in stead of revolution?
• Risk aversity
• More knowhow but less action? - diminishing
  population (Eur.) - less consumers (Eur.) -
  less economic growth 2 vs 7

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Defensive attitude ? Financial instruments

• Shift needed from state responsibility to
  personal responsibility
• Activate present (sleeping) customers of life
  insurances, mortgages
• New services and new players that will enter the
  arena
• Those (new) firms able to reach the position of
  trusted advisor will win
• Retiring generation has no experience with long
  term financial planning

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Exploding healthcare costs

• From 10 of GNP to 15-20 in 2040
• So costs wont rise that rapidly
• 70 of budget growth - equipment gets more
  powerful and cheaper but more widely used
  - pharmaceuticals 15 of budget and
  increasing
• Steady decrease in stay period cure
• Diversified supply care arrangements

• Costs of healthcare rise rapidly
• 70 costs in last 3 years of life
• Technology is driving force
• Productivity shift

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Healthcare costs ? Financial instruments

• Less state involvement dynamic, diversified,
  client driven, competition
• In the care sector diverse housing/service
  types in local neighborhood
• In the cure sector market orientation service
  transparancy
• Financial services
• Differentiated, transparant, information gt
  insurance and payment
• Service guarantee in stead of financial guarantee

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Financing gap
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Financing gap
Different systems for financing pensions in
Europe
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Financing gap ? Financial instruments

• Present arrangements provide basis, but need
  adjustment
• Other products needed more savings, less
  credits, estate planning
• Transparancy pension status
• Some maintenance of the 3 pillar system
• For those with a pension gap save, invest, etc.
• Much more attention needed for financial
  planning services!

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What does Silver Europe bring us?

• Workforce crises
• Diversity
• Defensive attitude
• Exploding healthcare costs
• Financing gap

• Flexible arrangements
• Other values and needs
• Personal responsibility
• Dynamic perspective
• Communication and financial innovation

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Conclusions

• The population will change rapidly (age,
  culture, attitude, etc.)
• Measures need to be taken asap lower costs
• In general
• (some) changes in pension systems
• not people working longer, but let more people
  work
• more savings (babyboom?) - risk averse
• transfer to next generation
• Financial institutions will innovate in response
  to new competitors
• develop new ways to inform and advise their
  clients (intimacy)
• invest in more flexible financial products
  (asset lt-gt income)
• reduce transaction costs
• New financial instruments will be developed to
  handle ageing risks
• derivatives regarding mortality risks