‘Perfect storm’ puts over-65s at risk

Heatwaves are killing more Australians than any other natural disaster and are expected to become more frequent and last for longer. And particularly at risk are over-65s.

An Actuaries Institute paper says that deaths from heatwaves could rise by 12 per cent among over 65-year-olds, with heatwaves expected to triple in some regions.

“More frequent, longer and hotter days will drive a significant increase in mortality, with Australia’s ageing population amplifying the number of people who will die as a result of climate change,” the paper says.

It also canvases the financial implications of climate change for investors, warning of long-term negative returns.

The paper, The Impact of Climate Change on Mortality and Retirement Incomes in Australia, was written by Ramona Meyricke, a senior actuary and associate investigator, and Rafal Chomik, a senior fellow at the Centre for Excellence in Population Ageing Research at the University of NSW.

“Understanding the potentially significant implications of climate change is crucial to Australians’ wellbeing,” said Actuaries Institute president Nicolette Rubinsztein. “Many Australians understand the physical risks posed by climate change, but few appreciate the impacts it could have on their mortality risks and their retirement savings.”

The paper examines how climate change will affect Australians in broad ways, including the impact on economic growth, health and mortality, government spending and investment returns. It explores the consequences for individuals and businesses, including health, general and life insurers, pension providers, investors and emergency services and governments.

It states that climate change and ageing populations are interacting to create “a perfect storm”.

“Without proper risk management, these megatrends have the potential to overwhelm individuals, private companies and government balance sheets over the course of this century,” the authors state.

“In terms of public policy, the wide-ranging consequences of climate change on mortality, public health and the economy mean that system-wide policy responses are necessary to mitigate the risks posed.”

Heatwaves have killed more Australians than bushfires, cyclones, earthquakes, floods and severe storms combined, and are the main threat to Australians’ mortality from climate change, the authors say, warning that population ageing is a major contributor to the numbers.

The Australian Bureau of Statistics (ABS) projects that by 2050, the population of over-65s and over-85s will nearly double and triple respectively.

“Population ageing will amplify the burden of heat related mortality and health risks in a warming climate – an interaction that policymakers and insurers have not yet fully taken into account,” the report states.

It says that the potential impact of climate change could also extend to lower superannuation contributions and investment returns due to negative long-term returns for investors whose portfolios are not diversified. This, in turn, could lead to lower superannuation balances.

“Illustrative scenario modelling suggests that an individual earning around $75,000 per annum could retire with 11 per cent to 18 per cent less, or a superannuation balance of $40,000 to $70,000 less, because of lower contributions and/or lower investment returns. The impact would be greater for those who experience both reduced contributions and investment returns,” according to the study.

The predictions also have major implications for pension providers, including the Federal Government. The authors say there may be a greater reliance on the Age Pension if climate change seriously diminishes superannuation balances, and a higher cost of provisioning for future Age Pension liabilities if investment returns are lower.

Have you considered the implications of climate change on your income?

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Written by Janelle Ward

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