What is retirement? What does it mean for individuals and what does it represent for industry and business? Not a day goes by without the media running another story about the issues facing older people as they approach retirement, from finances to health concerns. In truth retirement is not a universal experience; it is different for each person that achieves it, and is informed by who they are, what their background is and the ambitions they hold. Older people are not one homogenous group; they are instead a diverse and shifting collection of individuals likely to spend more time in retirement than ever before.
We know that increasing longevity is dramatically changing the demographic landscape and recent census data has shown that one in six people in England and Wales are now aged 65. This is the highest proportion ever recorded at this age. What is most staggering is the change in numbers of the very oldest. The number of those aged 90 or over has reached almost half a million, a sizeable increase from 2001 when it was just 340,000. This demographic shift brings with it significant challenges, of that there is no doubt. But there is so much focus on the difficulties faced both by society, and by some older people themselves that we are ignoring the other side of this coin: the opportunities for society and business.
Providers catering to the older demographic must innovate in order to meet the needs, but also the ambitions, of this powerful and growing market and claim for themselves and their investors a share of the growing spending power of this generation. One important area of retirement that is often ignored or misrepresented is where and how to live. Currently the options are poorly promoted and too much focus is dedicated to the care/institutional model which is, frankly, less than ideal and naturally not a popular choice with many people. Pioneering and sustainable alternative forms of retirement living will prove beneficial to residents but also to the investors behind them: it's a win: win situation.
The opportunity for investment is huge, and we need only look to the international comparisons for a sense of the scale. Currently market penetration in the UK is less than 0.5 percent, compared with 14 percent in the US and 8 percent in Australia. This represents less than 15,000 retirement living units in the UK as opposed to 160,000 in Australia and 600,000 in the U.S. The international markets are at various stages of their development; while the U.S. 'senior' living industry has been around for some time and is well established, the Australian market is still young, having begun in the early 1990s. In relative terms and given the size of the population here it suggests that the UK could sustain almost half a million units. Undoubtedly the return on investment could be significant with the target market growing at a rapid pace.
There are also broader benefits on offer here. In recent weeks Planning Minister Nick Boles has said that the Government has a 'moral' duty to force councils to find land to develop and prevent home ownership from becoming the preserve of the wealthy. It is no secret that the UK is facing an increasing housing shortage, which has lead to Nick Boles' comments. However there is a significant amount of property that could be made available, mitigating the current shortage without the need for additional building or development.
According to the latest ONS General Lifestyle Survey more than 60 per cent of 60-64 year olds own their homes outright and in total the over 60s hold more than £1trillion in housing equity. Many of this generation continue to live in the old family home, which has long since outgrown them, for sentimental and practical reasons. There is an intrinsic anxiety associated with downsizing and yet the properties are often unsuitable for changing needs, expensive to run and increasingly difficult to manage. Credible alternatives could see this generation embracing positive downsizing and in the process releasing valuable housing stock and providing much needed stimulation to a stagnant market. As the recent HAPPI2 report, which was published in November 2012, notes, if 2% (84,000) of the older people presently under-occupying their homes moved into tailored retirement housing, 400,000 people could find their housing needs met.
It is time we looked openly at what retirement means in a changing world and embrace the opportunities it represents across industry, business and society. Retirement living represents a very real investment opportunity and could also dramatically revolutionise the provision for older people across the UK.