We all know that the world is changing, we just cannot be sure exactly how. 

    We at the Pensions Policy Institute (PPI) have been looking ahead not months but decades, in order to see how changes in the way we live life in the future might impact how we save and spend our money.

    We have also sought to understand how individuals, employers, government and providers might need to change to help people adjust to this shifting landscape.

    It is generally accepted that people are living longer. This increase in life expectancy is a key challenge for society. 

    There are additional costs of the future life arising from changes in work, health, family and housing. To adapt to a longer life, PPI research has shown that individuals need three mindset shifts:

    1) Thinking more about a multi-stage life, with breaks and overlaps between the stages, including in retirement

    2) Thinking proactively about work and health

    3) Planning accordingly. Financial planning will need to encompass how long we work, the nature of retirement and how to budget for variations in income and expenditure.

    However, not everyone is prepared for such change. YouGov research for the PPI shows that among 18-39 year olds, some still have traditional mindsets.

    Around a third wanted to have one job for most of their working life, while just under half do not feel they have savings to fall back on. Separately, six in 10 envisaged having their own home within the next 10 years. 

    To support the mindset shifts required and to enable a longer, more productive life, five key behaviours were identified:

    • Resilience - This means being able to withstand dips in income, and individuals being creative and tenacious about finding employment in a changing environment.
    • Agility - Being willing and able to move into new roles and acquire new skills.
    • Health - The need to take a more holistic view of wellness across social, mental and physical well-being.
    • Flexibility - Connecting with new and diverse social groups and being mobile, possibly moving to where the new jobs/opportunities are.
    • Financial capability - Budgeting and the ability for individuals to save throughout life will help cope with the peaks and troughs, thus limiting the negative consequences.

    But individuals aren't the only ones that need to adapt to the future.

    After all, if nothing changes in terms of pensions policy, savings products and incentives, it could be hard for consumers to stay financially secure during a more complex, longer life.

    The risk of being financially vulnerable in the short term can be a barrier to long-term saving.  A simpler more accessible savings landscape might help individuals, but it is still likely that individuals will need to save more in preparation for longer lives, as well as save smarter.

    In light of this, it is timely to rethink policy issues across the different aspects of life, and the potential role others might play in helping people to fundin a longer life. 

    How can policymakers think differently?

    The issue of multi-stage lives raises a number of important questions. 

    Are current infrastructures likely to be fit for purpose in the future? Do the present arrangements for administration, tax and regulation support hybrid short-/long-term products and accessible pension savings? 

    How do pension contribution levels need to change? Higher contributions to workplace pensions by employees, employers and government could help reduce the risk of a lower income in retirement, particularly if people had earlier access to pension savings. 

    What is the role of the state pension? The state pension could become more important as a safety net if people do access their workplace pension earlier. It's also crucial when it comes to those on lower incomes, as they are likely to continue to rely more heavily on the state pension to help fund retirement. 

    What about providers? 

    Consumers don't always differentiate between saving vehicles, so having one product for cash, one for savings and another for  retirement are boundaries which have been generated by the financial services industry.

    As with policymakers, financial services firms also have a number of issues to grapple with related to longer lives. 

    Does the industry need to do more work on what life will look like for individuals in future? Assuming this is the case, once this work has been carried out, the industry needs to ask itself what are the suitable products, and the relevant guidance and advice that are needed to enable individuals to achieve their ambitions and goals? 

    How can the industry work at communicating more effectively with individuals, especially at 'teachable' moments?  What ongoing support, guidance and advice will people need, not only in their working lives but during their retirement too?

    As much as individuals will need to shift their mindsets to succeed in the future life, there is also room among others to do so as well, including policymakers and product and service providers. 

    Success in adapting to a longer life is more likely if all the groups involved begin working towards a common goal.

    For more from the PPI's Future Life series, you can read their reports in full below:

    Living the Future Life

    Funding the Future Life

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