EMEAAon Risk Solutions population whitepaper

An ageing population – a threat or an opportunity for your business?

Health & Benefits EMEA Whitepaper August 2017

Risk. Reinsurance. Human Resources. EMEA ageing population whitepaper

Are you ready?

The ageing of , also known as The science of how long people will the greying of Europe, is a demographic be supported to live in the future is far phenomenon characterised by a decrease from clear cut. Yet what is clear is that in , a decrease in , ever increasing longevity is already and a higher , albeit having a profound impact, and on not necessarily in good health, among developed economies and the make-up The most significant change European populations. of workforces. will be the transition towards a much older population Low birth rates and higher life expectancy For the economy as a whole the increase contribute to the transformation of in employment of older workers is structure, especially the Europe’s shape. The important if economic growth is to increase in the age group chart below shows how the population be achieved, and the tax revenue and over 65 up to 2030. pyramid will change between 2015 and the social security systems including 2080. There is an obvious and dramatic the guarantee of reasonable pensions increase in the number of people both are to be safe-guarded. For individual male and female over 85. Less immediately companies the story might not be so obvious but clear on examination is the straightforward and the ageing workforce gradual squeeze of the pyramid to the needs to become a business agenda item. older ages. The most significant change will be the transition towards a much older population structure, especially the increase in the age group over 65 up to 2030.

85+ 80-84 75-79 70-74 65-69 60-64 55-59 50-54 45-49

Age 40-44 35-39 30-34 25-29 20-24 15-19 10-14 5-9 0-4 5 4 3 2 1 0 1 2 3 4 5 % of total European population

Solid colour: 2080 Bordered: 2015 Men Women

Population pyramids, EU-28, 2015 and 2080 (% of the total population) Source: Eurostat

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What does it mean for your Does this demographic business? B&Q change present you with new The UK based DIY retailer sees that an There are just a few well-known case risks, or new opportunities? age diverse workforce brings a wealth studies of companies who have embraced of skills and experience, and aims Do you need to retain older workers to the need to adapt their work place to to provide an age neutral benefits meet your future business requirements? having an older workforce. package. B&Q actively recruits from Will you need to adapt your business to all ages and 28% of its workforce is retain older workers as there will be skills over 50 and it has many semi-retired shortages? Or does the ageing nature of BMW employees. B&Q’s oldest employee is your population cause you diffifculties A new BMW factory was built in 96 and works on the checkouts. perhaps because of the physical nature of Dingolfing, which was designed with their work? If your population is ageing older workers in mind. The plant, how might this impact your productivity nicknamed Altstadt (“Old town” in and competitiveness? But these companies are unusual and more German) is a fifty-something factory What impact will this ageing population often the discussion we are having is that worker’s dream: better lighting, have for: mobile tool carts, ergonomic back whilst firms recognise the issue they have supports for workers who spend yet to address it. Your organisational structure all day turning monkey wrenches, stools to sit on, and a greater variety Your benefits package of robots to perform menial tasks. Your wellness strategy Perhaps most helpfully, the plant also includes a production line that has HR policies and practices been slowed to a third of its normal speed. The 200-person factory was Health and safety policies designed by automotive engineers and industrial architects, with a little help from physical therapists and doctors. This isn’t a one-off design for BMW, either. The automaker plans to expand the Old Town model to 4,000 workers in different factory locations.

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Understanding the risks If you have a workforce that has both Taking action middle-aged and older workers and opportunities Many of these issues take time to Do you know how your employee Does the growing proportion of older understand and tackle so what practical demographic is changing? workers in the company carry risks of steps can you take now? increased absenteeism, the rise in the The first step is to create an age structure numbers of workers with diminished Once you have completed your analysis to show the actual age of the work capabilities, or the flexible deployment demographic analysis, aim to understand force and its expected development in of staff? What can be done to maintain the new risks that older workers might the future. This can form the basis of the and promote efficiency and innovative bring to your business and measure discussion for future policy changes. capabilities of future older workers? against the benefits their experince might bring. If your age structure analysis reveals Do your health, safety and wellbeing that older workers dominate policies reflect the age profile of your work Audit your benefit and compensation force? structures Is there a threat of staff bottlenecks or a loss of expertise owing to the departure of Do your office ergonomics support older the older workers? Are there procedures workers? e.g The provision of more Pension Issues for the early and systematic transfer lighting for employees over 55? of knowledge in the company (e.g. Does having an older workforce mean succession and mentoring models?) Do Do your training and recruitment policies that your compensation costs increase as health, qualification or staff deployment support the workforce shape you are traditionally salaries and benefits increase issues arise with older employees? trying to create, and support older workers with age and seniority? to retrain to more suitable roles? If middle-aged workers dominate Does your defined contribution (DC) Does your culture support the diverse pension plan offer the right support and Will these workers all remain at the nature of your workforce, and do your guidance to employees approaching company for a long time and age corporate guidelines promote negative or retirement to ensure that they retire at the together? Will they go into retirement at a positive attitudes towards older workers? right time, for them and the company? later date compared to today’s ? How can the work ability and performance What are you doing to stand out from the What is the usual age of retirement? of this group be promoted so that competition in order to attract younger Traditionally businesses have supported reductions in performance can be largely workers to your organisation? pension benefit structures that offer prevented as they grow older? financially attractive early retirement, does this continue to be an appropriate strategy if you need to retain expertise?

What level of pension benefits are staff likely to receive? Is this an incentive to retire, or are they likely to want to work longer as they won’t have sufficient income, regardless of whether you wish to retain them or not?

Do you monitor the replacement ratio of salary to pension of your staff to ensure inadequate pension income is not the driver for their retirement decision?

Does your pension arrangement support gradual retirement / part time working?

We are seeing firms recognise what a key part of future worforce planning the design and promotion of pension arrangements are. There is also an increasing recognition that the employer has a role to play in helping staff see their pension planning in the wider context of their financial affairs.

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Healthcare issues reactive methods to manage spend, such as broking or rationalising benefit Do you understand your people risk today provision. Alternatively, employers have and have you modelled what that risk never been more empowered to build might look like in the future? on the traditional approach. There is a real opportunity to use the data available Have you reviewed your health care Do you understand your to understand what the health risk provision (benefits and services) to ensure people risk today and have position is now, what the future might it is targeted at the right interventions look like, how data can be segmented to you modelled what that risk for your workforce demograpic? The target ‘at risk’ employee demographics, might look like in the future? needs, issues and costs for older workers adopt a truly integrated approach with will be very different to other workforce insurers and service providers and demographics. achieve better terms from the markets. Preventable, long-term diseases represent We are seeing an increase in employers a significant risk to employers and this will moving into this proactive space. remain the case unless lifestyle risks and Shifting the focus away from managing behaviours, such as poor diet, smoking, medical conditions, moving towards physical inactivity and excessive alcohol a more sustainable and preventable consumption are addressed proactively. approach, helping employees and their Indeed, if we accept that there are eight families to engage better with their risks and behaviours that result in 15 health and improve their lifestyle risks. Contact us chronic medical conditions, and that these What is your organisation doing in this Email: account for 80% of the total costs for all area and what metrics are in place to Telephone: chronic illnesses worldwide*, then the measure the success of any initiatives? Website: business case for improving this position is clear.

Employers are faced with a choice, the first option would be to maintain the status quo, accept their employee health risks for what they are, and use traditional

*Source World Economic Forum

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Nothing in this document should be treated as an authoritative statement of the law on any particular aspect or in any specific case. It should not be taken as financial advice and action should not be taken as a result of this document alone. Consultants will be pleased to answer questions on its contents but cannot give individual financial advice. Individuals are recommended to seek independent financial advice in respect of their own personal circumstances.