With ageing populations set to rise rapidly across the world in the coming decades, the preferences and needs of older generations will create sizeable investment opportunities in both new and established industries.

Just seven decades ago, in the 1950s, the average life expectancy was 47 years old¹. A baby born in 2023 is expected to live to the age of 73².

This sharp rise in life expectancy is being driven by improved nutrition, access to clean water, better healthcare and medication, as well as vastly improved living standards in both developed and emerging markets. It is being accompanied by declining birthrates. Rising living costs combined with more women in the workforce has contributed to couples opting for fewer children when compared to the preferences of families decades earlier.

Research by the United Nations Department for Economic and Social Affairs³ highlights how in 2021, over 65s represented 10% of the global population. Yet by 2050, it projects this number will rise to almost 17%.

In Asia, the issue of ageing populations is particularly acute. By mid-century, about 41% of Hong Kong’s population⁴ will be aged 65 or over for example, with the proportion of this age group amounting to 39% in South Korea, 38% in Japan, 35% in Taiwan, and 34% in Singapore⁵.

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Healthcare opportunities

Notably, such increases should lead to increased expenditure on healthcare. According to a Peterson-KFF analysis of 2021 Medical Expenditure Panel Survey Data⁶, over 65s already represent 36% of all medical spending in the US, a disproportionate amount versus younger age groups. As a share of US GDP, healthcare spending amounts to about 17%⁷, versus around 10% in other developed economies⁸. With ageing populations set to rise rapidly globally in the coming decades, the preferences and needs of older generations will create sizeable investment opportunities in both new and established industries. 

Healthy ageing is a priority. Business across the spectrum of this sector stand to gain. Pharmaceutical companies that manufacture drugs to treat prevalent illnesses — including cancer, cardiovascular, and nervous system diseases — should benefit as populations age. So too should makers of medical technology and machinery, diabetes management specialists, cardiology device manufacturers, and manufacturers of replacement joints. Diagnosis and treatment of these conditions typically happen in later life.

Companies providing data, software and services to the healthcare sector should also benefit from ageing populations. The global healthcare software-as-a-service sector was valued at almost USD 29 billion in 2022; within 10 years, it is predicted to rise to over USD 77 billion⁹. Investment opportunities should arise in multiple markets globally.

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China rising

Opportunities in China are especially noteworthy. Already the nation is the second largest healthcare market globally, and its growth potential is enormous largely due to its ageing dynamics, which are among the most acute globally. Life expectancy rose sharply from almost 45 in 1960 to almost 77 in 2020¹⁰ . By 2050, it is projected to be almost 82¹¹ .

Since 2009, a vast programme to improve and modernise China’s healthcare system has been underway, with the goal of providing universal health coverage. At the end of 2023, 95% of China’s 1.4 billion population — 1.33 billion people — had coverage under the nation’s basic medical insurance scheme¹². Notably, policies like China's National Volume-Based Procurement, which cut prices for 294 formulations of drugs by an average of 53% between 2018 and 2022¹³, has made healthcare cheaper and more accessible for all.

Both Chinese and Western companies in the drug, diagnostic, and medical devices spaces stand to gain from such policies, given the sheer size of China’s elderly demographic. Local pharmaceutical companies are pushing ahead with home-grown innovations; and of the 362 novel active molecules launched between 2018 and 2023, 192 — 53% — came from China¹⁴. The nation is now conducting more clinical trials than Europe.

Chinese government initiatives are also driving the use of artificial intelligence in healthcare system design and access, and molecule selection and testing. With government support, these ventures should see Chinese industry innovation exported to healthcare markets overseas as well.

Active lifestyles

A longer life in retirement typically equates to more leisure time. In developed Western markets, this is coinciding with the spending of accumulated wealth, helped by the combined result of rising property prices and stock markets in the decades prior.

The travel and leisure sectors are benefiting from the spending of these accumulated savings. Some 85% of US travellers over the age of 50 rank travel in their top three priorities for discretionary spending¹⁵ — significantly higher than any other discretionary expense — research by the American Association of Retired Persons finds.

An active and healthy older lifestyle can also raise demand for specialised supplements and vitamins. It prompts demand for new technologies to improve cognitive capacity, and ways to deal with a lower appetite and the risk of dehydration. Ageing populations can also drive increased demand for eye care and hearing aids.

The pursuit of an active older lifestyle is also leading to the rising use of consumer wearables, to monitor activities such as sports, as well as to raise awareness of possible health conditions. For those in need of more support, care robots are becoming an option¹⁶. Manufacturers of these technologies, as well as owners of private nursing homes, should gain from such trends in the coming years.

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Funding longevity

While many developed market retires have adequate or elevated disposable income, some may not have the finances to adequately support themselves for a prolonged life. Neither private individuals nor governments are prepared for the additional financial burden of ageing populations. According to the World Economic Forum, the pension savings shortfall in the US, UK, Japan, Netherlands, Canada, Australia, India and China will rise to USD 400 trillion by 2050¹⁷.

To meet this gap, governments must revise their healthcare and retirement systems. Individuals will have to undertake more responsibility for their health and longevity needs. This will also require creative solutions from financial institutions across life insurance, savings, and retirement solutions.

Insurers are well placed to take advantage: there are now many variations on traditional life insurance policies and annuities. Regulatory changes made in the wake of the global financial crisis prompted insurers to diversify from capital intensive annuities and fixed rate guarantees into capital-light, fee-generating life and health insurance. At the same time, demand for private health insurance plans is surging, as consumers recognise the income shortcomings of state-sponsored social security provisions.

According to a recent Federal Reserve survey, 47% of respondents do not think that their retirement savings plan is currently on track¹⁸. Reasons for this include worries about being able to pay for their own care as they age, and about passing on wealth to subsequent generations. This underscores the need for tried and tested wealth and asset management solutions to support them in this process. Indeed, the opportunities to assist clients in this field are ripe.

Investment opportunities

At Lombard Odier, we seek to assist clients with their wealth management needs. This includes a thematic investment approach built on our analysis of fundamental transformations underway in our economies and societies. We have identified six of these themes, and the investment opportunities that flow from them – not just changes in longevity, but also broader demographics, technology, infrastructure, and the transition to a net-zero and nature-positive economy. You can read about the others here .

¹ Annual global life expectancy at select ages from 1950 to 2022, with projections until 2100 (statista.com)
² Annual global life expectancy at select ages from 1950 to 2022, with projections until 2100 (statista.com)
³ Leaving no one behind in an ageing world (un.org)
⁴ Leaving no one behind in an ageing world (un.org)
⁵ Leaving no one behind in an ageing world (un.org)
⁶ How do health expenditures vary across the population? (healthsystemtracker.org)
⁷ National health expenditure data – historical (cms.gov)
⁸ Health spending and financial sustainability (oecd.org)
⁹ Healthcare Software As A Service Market Size, Share, and Trends 2024 to 2034 (precedenceresearch.com)
¹⁰ Life expectancy (from birth) in China from 1850 to 2020* (statista.com)
¹¹ China Life Expectancy 1950-2024 (macrotrends.net)
¹² China's healthcare authority refutes hypes of 'dropout wave' in medical insurance (globaltimes.cn)
¹³ Improving access to medicines and beyond: the national volume-based procurement policy in China (NIH National Library of medicine)
¹⁴ Rethink investments (Lombardodier.com)
¹⁵ 2023 Travel Trends, March 2023 (aarp.org)
¹⁶ Commentary: The ‘carebots’ are coming - how will they shape eldercare in Singapore? (channelnewsasia.com)
¹⁷ We’ll Live to 100 – How Can We Afford It? (weforum.org)
¹⁸ Supplemental Appendixes to the Report on the Economic Well-Being of U.S. Households in 2023 - May 2024 - Appendix B (federalreserve.gov)