How a longevity economy can make growth work for every generation

Volatile markets, shifting political dynamics, escalating conflicts, the intensifying climate crisis and the disruptive rise of artificial intelligence (AI) – these powerful forces are redefining the global landscape.

Yet, as is often the case, some of the most potentially positive and long-term trends remain under-prioritized.

Chief among these is the profound yet under-discussed trend of how societies are ageing rapidly as lifespans continue to rise, a change that carries deep and compounding impacts, the longer it goes unaddressed.

If tackled correctly, however, ageing populations could represent one of humanity’s greatest opportunities: more quality time with loved ones and longer lives in better health.

However, realizing that potential requires modernizing the systems that were built decades ago with the assumption that retirement would last roughly 10 years, based on OECD data.

Today, people enjoy a much longer retirement. What few realize is that the forces behind this trend are accelerating, creating mounting pressure on how we fund the growing gap between retirement and expected lifespans.

For instance, average life expectancy has increased by a decade since 1980. If the retirement age globally broadly remains the same at 65, the period that pension and social security systems will need to cover could double.

The global population over the age of 65 is expected to more than double to 1.6 billion globally over the next two decades. The worker-to-retiree dependency ratio is expected to exceed 60% in just over two decades in East and Southeast Asia, North America, Oceania and Europe, which is substantially higher than the global average.

The impact of ageing raises a series of monumental questions when considered at a societal scale:

These questions are at the heart of the “longevity economy,” which will soon become a core component of the real global economy, focusing on growth generated from an expanding cohort of older individuals. They will require systemic shifts to achieve long-term outcomes, which could be achieved through several areas.

Bringing about pension reforms across markets with more traditional systems is a critical step. One significant shift that has been taking place and should accelerate is the transition from “defined benefit” to “defined contribution” pension schemes to better address longevity demands.

In several large pension markets, defined contribution assets now account for 59% of total assets, up from 40% in 2004.

The change to defined contribution means that retirement payouts are tied directly to the performance of the individual’s contributions in the market and are tailored to each person’s stage of life. For younger generations, this shift can enable participants to accumulate retirement funds more effectively and earlier.

After evolving through numerous growth phases, advanced economies worldwide are now transitioning from an era driven by globalization to one increasingly led by technological advancements, such as artificial intelligence (AI).

No matter how transformational new technologies may be, however, birth rate declines, urbanization limits, housing supply constraints and inflation pressures will act as a counterweight to the pace of more domestically oriented growth.

The golden rule in long-term and large-scale investing, as pension funds do, has always been diversification – ensuring return drivers are as different from each other as possible to sustain truly broad-based growth.

This means that investors responsible for supporting pensioners decades from now must continue tapping into the markets today, where fundamental value creation is still taking place.

Looking at urbanization alone, Asia still has over a billion people who will move from rural regions to urban centres in the coming years, which can drive substantial growth in real estate, logistics, digital and energy markets.

Younger economies that are still reaping the benefits of demographic dividends will continue to offer this opportunity for decades to come.

At the same time, these emerging economies can diversify their sources of long-term returns by developing exposure to growth assets in advanced markets overseas. These mutually beneficial financial flows may help more societies keep pace with global ageing.

The longevity economy can help more societies sustain growth by reimagining work itself. Flexible roles, lifelong learning and multigenerational workplaces can help sustain economic growth while enriching lives.

Work also does not just provide income; it offers purpose, social connection and mental stimulation, all of which are critical to healthy ageing.

Globally, labour force participation around retirement age is already on the rise. Participation among workers aged 55–64 has increased by 7 percentage points since 1992.

Certain advanced economies, such as Japan, have been taking the lead, with 80% of workers wanting to continue working after retirement, resulting in 1 in 4 people over 65 remaining employed.

At the same time, advancements in technology, particularly generative AI, have the potential to transform long-stagnant productivity levels, with McKinsey & Company estimating that generative AI could add $2.6-4.4 trillion annually to the global economy.

Ageing societies managed correctly within an increasingly longevity-focused economy are not just about adding years to life but also ensuring societies thrive across all age groups.

By reforming pension systems, expanding access to diverse sources of growth and rethinking productivity and employment systems, we can create a more resilient and equitable future where younger and older generations flourish together.