A report from the Economist Intelligence Unit.

Older, but
none the wiser?

The implications of an
ageing workforce in the UK
Sponsored by


Older, but none the wiser?

Contents

1

Executive summary

2

Calm before the storm

3

Employee demands are changing

5

Healthy workers, healthy profits

7

the continent reached an inevitable demographic tipping
point. The percentage of the population of working age fell
for the first time in 40 years. It is now forecast to fall every
year until 2060. This inescapable trend will have profound
implications for governments, citizens and companies
across Europe.
The demographic make-up of the UK means that the country
has more time to adjust—until the early 2020s—than the
continent’s other large economies, according to European
Commission forecasts. But are UK companies using that time to
their advantage?
To explore some of the issues that senior executives will have
to address as they seek to adapt their organisations to this new
world, The Economist Intelligence Unit, on behalf of Towers
Watson, surveyed 480 senior executives at companies across
Europe, with 84 in the UK. Just over three-quarters (76%) of
those in the UK expect the number of their employees aged 60+
to increase by 2020, including 29% who expect it to increase
significantly.

2

Key findings include:
Companies have a chance to prepare now, but most are
not taking it. Workforce ageing will hurt the UK later the
continent’s other main economies. But this opportunity is
being squandered. When it comes to the kind of workplace
changes that experts say are essential, UK companies are at
the bottom of the European league table. Less than one-fifth
(18%) plan to let older workers cut their hours without feeling

EU’s other large economies. Germany, one of
the most exposed countries, could experience
serious labour supply constraints within the
next two or three years under the European
Commission’s most pessimistic scenario. The UK
has a younger population; the Commission does
not expect demographics to start hurting its
economy until the early 2020s. But when the pain
does arrive, the Commission says the UK should
have had much more time to adjust, because it
will have had more scope to bring people into the
workforce and to improve productivity.

Perhaps it is no surprise, then, that the survey
found that UK executives are currently the least
concerned in Europe about the challenge of
managing an ageing workforce. Just one in 17
UK executives sees ageing as an issue today; that
level is over five times higher in France. But this
period of executive calm is not likely to last.
UK companies will shift their priorities over
the next few years. They currently have a laserlike focus on cost control—68% say it is one of
their two most important business concerns,
the highest percentage in Europe. As economic
prospects brighten, the focus on managing
costs will diminish. By 2020 only 20% think it

Chart 1
What would you say is the most important business priority for your organisation currently?
(% of respondents)

45

24 25
14

8

14

4

Restructuring

Cost control

Expansion

Source: The Economist Intelligence Unit.

3

20

18

© The Economist Intelligence Unit Limited 2014

Innovation

Talent management

55

Offering more flexible working hours
or working from home

46

Ensuring that the skills of older
employees remain up to date

48

39
48

Giving employees more choice
over their benefits

Other, please specify

77

32

18

45

Looking at how to address intergenerational differences in our
workforce

ageing will become more of a concern. The survey
shows that it will climb up the executive agenda
across Europe, but nowhere is the expected leap
as high as in the UK, where four times as many
executives think it will be a top-three issue in
2020—the biggest increase in Europe.
UK executives have time to prepare that their
peers in other countries would envy, but most
are making little use of it. “The key to engaging
and retaining older workers is to adjust work to
their needs,” says Maria Karanika-Murray, a work
psychologist in Nottingham Trent University’s
School of Social Sciences. “Some companies are

4

© The Economist Intelligence Unit Limited 2014

already doing this, but many are unsure of their
options.”
In important areas, UK companies are lagging far
behind. Only 28% of survey respondents say they
are planning to ensure that the skills of older
employees remain up to date. Just 18% expect
to adapt their structures so that older workers
who cut their working hours or responsibilities
can retain their status in the business and feel
valued. On both points, the UK comes bottom in
Europe—by a wide margin.
More needs to be done, believes Baroness Sally

of UK executives report that work-life balance is
a top-three concern for their employees—that
is by far the highest figure in Europe. By 2020
executives in every country, apart from France,

But how companies plan to deliver that flexibility
varies by country. For Europe as a whole, the
most common response is to offer more flexible
working hours or working from home (56%).
UK companies see this as a way forward too.
But they are far more likely to see better benefit

Reflecting the shift from money to lifestyle
benefits, one-third of European executives
expect their employees to want more job sharing,
part-time working, portfolio careers and the
opportunity for phased retirement. The common
denominator here is that employees want greater
flexibility.

Chart 3
What do you believe to be the issues your employees see as most important today?
(% of respondents)
Europe Now
64

UK now

Europe in 2020


19 18

14

17

15

14

11

24 24 25
17

20

28

17

11

6

Financial
security

Job
security

change
part-time working,
phased retirement)

8 7

Caring for
dependents
(children and
elderly)


Older, but none the wiser?

Chart 4
How likely is it that the benefit programmes you have in place now will remain fit-for-purpose in 2020?
(% of respondents)
Very unlikely

UK

Very likely

Don’t know

30

24
26


3

7 2

27

36

2

6 2

25

27

11

7

18

32

27

Netherlands

27


36

5

Source: The Economist Intelligence Unit.

programmes as the answer to their talent
management challenges. And here they see
significant need for change.
According to the survey, UK companies are the
most likely in Europe (48%, compared with an
overall European average of 39%) to feel that
the benefit programmes they have in place today
would not be fit-for-purpose in 2020. Some 60%
plan to change the employee benefits they offer
and to give employees more choice over their
benefits—by far the highest proportion in Europe.
But UK executives are also the most likely to
believe that the cost of benefits as a percentage of
salary will increase (62%).
Here they will face a conundrum: how can they
offer employees the choice and flexibility of

6

© The Economist Intelligence Unit Limited 2014

benefits and work practices they are looking
for without allowing costs to spiral upwards?
The survey suggests UK companies may be

7

© The Economist Intelligence Unit Limited 2014

of benefits, it is no wonder that UK executives are
the most likely in Europe (79%) to believe health
benefits will become increasingly important to
employees.
But does that rethink necessarily mean an
increase in cost? “If older people maintain a
healthy lifestyle, there is no reason why they
can’t choose to continue to work well beyond the
pensionable age and contribute in some way,
at no extra burden to the employer,” says Ken
Jones, chief executive of the UK-headquartered
European business of Astellas, a Japanese
pharmaceutical company.


Older, but none the wiser?

4

Tackling the pensions problem

Many companies see phased retirement as
an important way of adapting to an ageing
workforce. UK executives considering this option
are likely to be pushing at an open door. The
country’s citizens are almost twice as likely as the

42
38
33

33
29
24
19

18

17

18

14

17
12

14

12

12 12

Source: The Economist Intelligence Unit.

8


(defined benefit plans)

Excessive regulation

Cost of implementing
changes

Growing costs
(defined benefit plans)

6

1

Staff haven’t requested any
changes so employers do
not need to make any

19


Older, but none the wiser?

Chart 6
What is the biggest challenge facing the system for retirement savings in the country in which you are based?
(% of respondents)
Europe

UK
45

Employers underestimating
the future cost of promised
benefits

4

Unrealistic expectations
of individuals

6

Too many people not
working to or past the
state retirement age

7

Unrealistic government
entitlements (State pension,
pension age)

Insufficient savings
being made by individuals

Government deficits/debt
(impact of austerity
measures)

Demographic changes
(ageing population)

© The Economist Intelligence Unit Limited 2014

half (53%) of UK executives disagree with that
suggestion—more than double the proportion in
Germany and Italy.
For UK executives, the greatest threat to pension
provision in their country is the fact that—in
their view—employees are not meeting their
side of the deal. Whereas executives across
other countries say the biggest systemic
pension challenges are demographic change
and government deficits, those in the UK (45%)
overwhelmingly point to insufficient savings by
individuals. That is more than three times higher
than in the next country, the Netherlands.


Older, but none the wiser?

Case study: IHG
Compared with their European counterparts,
UK companies have been slow to think about
the potential impact of workforce ageing. But
the issue is on the agenda at InterContinental
Hotels Group (IHG), the UK’s second-largest
hotel operator.
Tony Voller, senior vice president of human
resources Europe and global employer brand
and resourcing, says the business will need to
find new ways to engage its 9,000-strong UK

making sure we’ve got the right people in the
right jobs at the right time. We don’t put a huge
focus on ageing per se; the key thing for us is to
find talent.”


Older, but none the wiser?

Conclusion

UK companies cannot escape the impact of
demographic change, but they could do a lot
more to prepare. The need to address workforce
ageing is not yet as urgent as it is in other
European countries, but surely that is an
opportunity for executives to plan now and deal
with the challenge effectively, rather than rush it
and make a mess.
This is particularly true in the realm of benefits.
The survey shows that UK executives see a more

11

© The Economist Intelligence Unit Limited 2014

flexible and employee-focused benefits package
as an important way of retaining and motivating
workers, who will be in increasingly short supply.
Yet those same executives are the most likely
in Europe to believe their benefits programme

(% respondents)
Innovation
55

Talent management (HR)
45

Expansion
44

Cost control
20

Risk control and management
20

Restructuring
4

12

© The Economist Intelligence Unit Limited 2014


Older, but none the wiser?
By 2020, what will be the main drivers of change for your business? Select up to two
(% respondents)
Global competition
66


31

Retention
28

Downsizing / offshoring
19

Skills shortages
14

Diversity of workforce
12

Healthy workforce (health, stress and wellbeing)
9

Regulation (state/EU)
9

Ageing workforce
6

Other (please specify)
0

13

© The Economist Intelligence Unit Limited 2014



Regulation (state/EU)
8

Downsizing/offshoring
8

Other (please specify)
1

What do you believe to be the issues your employees see as most important today? Select up to three
(% respondents)
Job security
62

Work-life balance
55

Financial security
52

Skill development
24

Stress and wellbeing
22

Employment flexibility (job sharing, portfolio careers, part-time working, phased retirement)
17


35

Employment flexibility (job sharing, portfolio careers, part-time working, phased retirement)
32

Job security
31

Skill development
28

Stress and wellbeing
18

New technology/pace of change
17

Healthcare provision
11

Caring for dependents (children and elderly)
7

Other (please specify)
0

What, if anything, does your business plan to do by 2020 in order to adapt to the changing needs of your workforce?
Select all that apply
(% respondents)
Changing the employee benefits we offer

35

Neither/neutral
26

Likely
18

Very likely
6

Don’t know
2

15

© The Economist Intelligence Unit Limited 2014


Older, but none the wiser?
By 2020, for the typical employee at your company, do you believe that the costs of benefits as a percentage of salary will:
(% respondents)
Increase significantly
14

Increase
48

Stay the same
26

It is difficult to reduce elements of our current benefits package so any change results in an increase in overall costs
20

Due to historic reasons/changes we have lost track of why we have the benefits we have
11

We only offer the minimum benefits that are legally required, and otherwise just pay cash
11

Other, please specify
0

Who should be primarily responsible for providing and/or funding the following benefits?
(% respondents)

Individual

Employer

State

Retirement provision
44

44

12

Savings scheme
77


22

End of life care
33

16

11

© The Economist Intelligence Unit Limited 2014

56


Older, but none the wiser?
Do you agree or disagree with the following statements about health and wellbeing of your workforce in the future (to 2020)?
Rate on a scale of 1 to 5 where 1 is strongly agree and 5 is strongly disagree
(% respondents)

1 Strongly agree

2 Somewhat agree

3 Neither agree nor disagree

4 Somewhat disagree

5 Strongly disagree


25

54

18 2 1

What is your company’s main objective in offering retirement benefits now?
(% respondents)
Wanting employees to have an adequate income in retirement
32

Attracting talent
24

Employee retention
24

Compliance
13

Workforce planning (managing when employees retire)
6

Other (please specify)
1

What will be your company’s main objective in offering retirement benefits by 2020?
(% respondents)
Wanting employees to have an adequate income in retirement
31

Excessive regulation
38

Managing the risk posed to the business (defined benefit plans)
33

Low levels of appreciation for retirement benefits among employees
29

Low levels of financial literacy/understanding amongst employers
17

Lack of tax incentives
14

Lack of bottom line benefit makes change hard to justify
12

Staff do not have time or resources to manage retirement plans
12

Low levels of trust amongst employees for financial products
12

Lack of tools to measure ROI to justify the costs
6

Other, please specify
0


1

Not relevant for my country, our retirement system is sustainable
0

Other, please specify
0

18

© The Economist Intelligence Unit Limited 2014


Older, but none the wiser?
Do you agree or disagree regarding the following statements about retirement provision in the future?
Rate on a scale of 1 to 5 where 1 is strongly agree and 5 is strongly disagree
(% respondents)

1 Strongly agree

2 Somewhat agree

3 Neither agree nor disagree

4 Somewhat disagree

5 Strongly disagree

It is not an employer’s role to help their employees to have a comfortable standard of living in retirement
13


How do you expect the number of employees aged 60+ to change by 2020?
(% respondents)
Increase significantly
29

Increase
47

Remain the same
18

Decrease
5

Decrease significantly
1

Do you agree or disagree with the following statements about older workers? Rate on a scale of 1 to 5 where 1 is strongly agree
and 5 is strongly disagree
(% respondents)

1 Strongly agree

2 Somewhat agree

3 Neither agree nor disagree

4 Somewhat disagree



39

16

Older workers are easier to manage than younger workers are
4

21

41

29

6

24

6

Older workers take more time off for health reasons than younger workers
4

20

46

Which of the following do you think is most likely to happen as a result of an ageing workforce? Select up to two
(% respondents)
Higher costs of benefits


CIO/Technology director
4

Other C-level executive
2

SVP/VP/Director
22

Head of business unit
5

Head of department
20

Manager
31

Other, please specify
0

What is your primary job function?
(% respondents)
Human resources
44

Finance
15


Legal
0

Supply-chain management
0

Other
0

How many employees does your company have globally?
(% respondents)
Less than 250
0

250-499
0

500-1,999
4

2,000+
97

20

© The Economist Intelligence Unit Limited 2014


Older, but none the wiser?
What is your industry?


Financial Services: Other financial services
1

Food and Beverage
2

Government/Public sector
0

Health Care
1

Hospitality (Restaurant, Hotel/Lodging, Tourism and Leisure)
6

IT and High Tech
8

Manufacturing
12

Natural Resources
0

Oil & gas
7

Pharmaceuticals
4

© The Economist Intelligence Unit Limited 2014


Older, but none the wiser?
Please state which of the following best describes your company?
(% respondents)
Publicly listed
71

Other privately owned (partnership, limited liability, etc)
18

Private Equity portfolio company
5

Family owned
4

Government/State owned enterprise
4

What are your organisation's global annual revenues?
(% respondents)
Less than €500m
0

€500m to €1bn
14

€1bn to €5bn

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