Governments must do more to reduce the long term cost of ageing to the public purse argues a new policy report from the International Longevity Centre – UK (ILC-UK).

“The cost of our ageing society”, sponsored by Milliman, highlights the projected financial impact of the cost of the world’s ageing population.

In the report, ILC-UK calls on governments across the world to consider linking eligibility ages of state pension to life expectancy and do more to ensure that the labour market is accessible to older people.

ILC-UK also argues that governments need to ensure pension systems are sustainable, allow for greater risk-sharing, and are less vulnerable to longevity risk. It also urges Governments across the world to consider how to create better conditions for health care innovation and development.

ILC-UK believes that governments need to prepare for uncertainty noting that “Policy makers today are being asked to prepare for a future about which there is a serious degree of uncertainty and therefore sustainable policies will be the ones which can adapt to unexpected changes.” It argues therefore that addressing the needs of ageing populations will require ongoing investment in research and data collection.

ILC-UK argues, however, that policy interventions must recognise the contribution that older people make to society and the economy. ILC-UK also points out that individual countries will need to ensure there are safety nets for those who cannot work longer.

“The cost of our ageing society” draws heavily on the European Commission’s 2012 Ageing Report (1) and the Office for Budget Responsibility’s Fiscal Sustainability Report, July 2012 (2)”. ILC-UK summarises the latest projections on longevity and the cost of ageing across the world.

  • In the UK:  age-related spending is projected to rise from an annual cost of 21.3% to 26.3% of GDP between 2016/17 and 2061/62, a rise of 5% of GDP (3) (equivalent to a rise of around £79bn in today’s money).(4)
  • In the EU: age-related spending is projected to rise from an annual cost of 25% to 29.1% of GDP between 2010 and 2060, a rise of 4.1% of GDP.(5)   However, a scenario which assumes greater resources devoted to development within health care projects that age-related spending in the EU could rise to as much as 29.8% of GDP, annually, by 2060. (1)

In the UK:

  • spending on public pensions (state pension, benefits and public service pensions) is projected to rise from an annual cost of 8.9% to 10.8% of GDP between 2016/17 and 2061/62, a rise of 1.9% of GDP (6) (equivalent to a rise of around £33bn in today’s money). 
  • spending on health care is projected to see the largest rise of all elements of age-related spending, rising from an annual cost of 6.8% to 9.1% of GDP between 2016/17 and 2061/62, a rise of 2.3% of GDP (2) (equivalent to a rise of around £36bn in today’s money).  The rise in projected spending on health care in the UK mirrors the increase in the ageing population. 

However, scenarios in which there were higher than expected levels of mortality, morbidity and health care development could see much greater increases in expenditure on health care. (2)

  • spending on long term care is projected to rise between 2016/17 and 2061/62 by 0.9%, from an annual cost of 1.1% to 2% of GDP, a rise of 0.9% of GDP (2)  (equivalent to a rise of around £14bn in today’s money). 

Baroness Sally Greengross, Chief Executive of ILC-UK, said “Our ageing society will have significant impact on state spending on pensions, health care, long-term care and unemployment benefits. Across the world, people will need to continue to work longer as a result. In the UK and across the world we will also have to innovate in health and deliver a sustainable funding settlement for social care."

Emma McWilliam, Editor Longevity Risk and Consulting Actuary Milliman, said “Intergenerational collaboration is key, especially given high rates of youth unemployment.  If those at working age are not employed, simple old age dependency ratios do not show the complete picture to Governments on how best to deal with the challenge ahead. Additional measures such as Labour Market Adjusted Ratios, as set out by the European Policy Centre, that effectively encourage policies around employment are definitely a step in the right direction to build public policy that reflects the current demographics and needs of all generations in our future society.

David Sinclair, Assistant Director, Policy and Communications at ILC-UK, added “Governments across the world must not ignore the future costs of our ageing society. These costs won’t just go away. Drifting along is not an option and does not benefit future older or younger people. Policymakers must urgently look to solutions to the long term challenge of mitigating the increased cost of an ageing society."


David Sinclair or Jessica Watson at ILC-UK on 02073400440 or 07531164886


Baroness Sally Greengross and David Sinclair are available for interviews on this report.

On 16th October 2012, ILC-UK organised an event on “The cost of our ageing society”. This joint debate between ILC-UK and the Actuarial Profession was sponsored by Milliman.

ILC-UK and the Actuarial Profession, sponsored by Milliman, are organising a further event on “The cost of our ageing society”. The event will take place on 20th February in Edinburgh (16:00-19:00). If you are interested in attending please email

The International Longevity Centre-UK is the leading think tank on longevity and demographic change. It is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change. We develop ideas, undertake research and create a forum for debate.

Milliman LLP is among the world's largest providers of actuarial and related products and services. The firm has consulting practices in life insurance and financial services, property & casualty insurance, healthcare, and employee benefits. Founded in 1947, Milliman is an independent firm with offices in major cities around the globe. For further information, visit and


  1. European Commission (2012) The 2012 Ageing Report. Economic and budgetary projections for the 27 EU Member States (2010-2060) European Union
  2. Office for Budget Responsibility (2012) Fiscal sustainability report, July 2012  (OBR)
  3. OBR (2012) Table 3.6, includes education
  4. GDP Projections by ONS, 2012/13 UK GDP- £1.57trillion, HM Treasury
  5. EC (2012) These figures include education which is also affected by demographics
  6. OBR (2012) includes Basic State Pension, State Second Pension, Pension Credit, Winter Fuel Allowance and other benefits


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