Australia is an aged society

Date: Aug 25, 2014

Fifteen per cent of Australia's population will be 65 and older in 2015, making it an aged society, according to a recent report. 

The new report for Moody's Investor Service, Population ageing will dampen economic growth over the next two decades, examines what populations already reach the ageing threshold identified by the United Nations and the rate of ageing. 

The United Nations defines a population as ageing if more than 7 per cent of the population is 65 or older. Australia's ageing population is expected to increase from 15 per cent in 2015 to 19.2 per cent in 2030, just below the threshold for super-aged societies of over 20 per cent. 

By 2015, more than 60 per cent of countries that Moody's rate will be officially 'ageing'. Currently, there are only three super-aged countries however this number will rise to 13 by 2020. 

Moody's predicts that this rate of ageing will have a negative effect on global economic growth over the next 20 years. This will be due to the rate of the global working age population slowing to 13.6 per cent by 2030, compared with 24.8 per cent in the last 15 years, which will place pressure on labour supply.

Madhavi Bokil, Moody's assistant vice president and an author of the report said policy reforms are needed to counteract the negative effects of ageing populations. 

"Policy reforms in the medium term which improve labor participation rates, streamline migration, and improve financial flows can partially mitigate the impact of ageing on economic growth," explained Ms Bokil. 

"Further, in the long term, innovation and technological progress that improves productivity have the potential to lessen the forecasted dampening effects of the rapid demographic changes."

The world's ageing population will also result in a decrease in the rate of household savings and consequently reduced investment, according to the report. 

Preparing for the future

Estate planning is important for dividing your assets when you're gone and protecting family wealth for the future. An ageing population and reduced economic growth and investment is a reminder that financial planning should be part of a comprehensive estate plan.

The Australian Securities and Investment Commission (ASIC) outline how finances should be sorted out. Appointing a power of attorney is important to ensure you are looked after financially if you lack the capacity to make your own decisions. Assets and bank accounts should also be reviewed as well as the beneficiaries of your will. 

Another consideration is that superannuation funds and insurance policies that have a binding nomination (when beneficiaries are named in the document) overrides people nominated in a will. So make sure the person nominated aligns with who you would like to receive the funds.