Roller-blades clue to a grey savings area of the future Why you will be the prey when you're old and grey

In 30 years, this sentence will be twice the size - the type that is, not the number of words. Because doubtless the average reader will have failing eyesight, just like the rest of us. By 2030, a quarter of the European population will be over 65, against only 15 per cent today, and businesses, governments and economists are already starting to anticipate huge changes to come.

Expanding markets for these new richer grey consumers, and falling national savings rates (as more people draw down their savings in retirement) are only two of the biggest consequences that most people expect. Economists then argue further about whether this kind of drop in savings will be bad for growth.

But the changes may not be quite as we anticipate. New research by Professor Richard Disney in today's issue of Fiscal Studies suggests that the key to the changes to come may lie in the rash reactions of the young, rather than the spendthrift habits of the old.

The idea that elderly consumer markets will expand seems well founded. The leisure and catering industries think so. The Joint Hospitality Industry Congress warned members last week to consider extra disabled access for restaurants and bigger type-faces for menus to cope with an older clientele.

The retired want different services from the yuppies and dinkies of the Eighties and Nineties. Businesses catering to the tastes of the older consumer will find their audience richer than ever before: 78 per cent of the 45-60 age-group are owner occupiers, compared with around 60 per cent of the over-70s.

Watch out, for example, for a boom in exotic foreign holidays aimed at older travellers, as Mintel the market research firm predicted last year. Or perhaps, looking further ahead, we can expect a sudden burst of outrage about the hitherto ignored monopolistic tendencies in the funeral industry. The wider economic consequences seem straightforward enough too, at least if you listen to simple economic theory. Given that spending patterns, savings habits, productivity rates and tax obligations are all heavily age-dependent, the greying of the nation seems bound to have an effect on aggregate economic performance too. As German economist Axel Borsch- Supan argues, "demographic shifts of such magnitude and speed are unprecedented since the Industrial Revolution, and the industrialised countries will need to learn how to cope with this change".

Simple economic theory tells us that more old people should mean less savings. According to the "Life-Cycle hypothesis" we borrow when we are young, save when we are middle-aged, then draw down those savings when we retire. As a result, if there are more old people running down their savings, then the aggregate savings rate must fall.

But the theory isn't borne out in practice. Many people want to die in credit, perhaps to pass assets on to children, or because retirement has made them more cautious than they ever were during their working lives. If assets aren't just financial but sentimental - such as a family home - the desire to hoard rather than spend increases even further.

In an analysis of the 1988-9 UK Retirement Survey, Professor Disney finds that many people keep saving long into retirement. So, a gradually ageing population should have a lot less impact on the overall level of savings than the pessimists predict.

If the next generation of old people carry on saving in the same way as the current one, then in theory there shouldn't be much problem for the savings rate after all. The OECD calculated the effect on savings rates over the next 30 years assuming the over-65s continued to save, but at half the current average savings rate. The upper lines on the graphs show the results for the US, Japan and the UK. The overall saving rate hardly changes.

Of course it would be foolish to be too optimistic. Suppose on the other hand that the elderly are forced out of their prudent habits by demographic pressure. If, for example, government provides less health-care support, long-term care support and lower pensions than they expected, they may have to run down their savings after all. The OECD calculates what would happen in this case, too - producing the much more pessimistic lower line on the graphs.

On the face of it, however, it looks as though we can sit back and relax. Savings by the elderly are fine - so presumably overall savings rates will hold up, too. Furthermore, retailers should not expect too big a boom in sales of elderly leisure services. For while there will be more of them, they won't be blowing their bank balances. Most of them will carry on saving instead. As a warning for the leisure industries, these new retired consumers may be more interested in special savings plans than they are in a round-the-world cruise. The two massive consequences expected of the ageing population look set to be damp squibs.

But a huge puzzle remains in all of this. Professor Disney's research shows that there is still a relationship between the age of a population and its savings ratio. Looking across different countries, and different time periods he finds that older populations do still save less. Despite the fact that the elderly don't run down their savings, countries as a whole do seem to cut their savings as their populations age. Savings may be set to fall in future after all, even if the elderly are not to blame.

He offers a fascinating possible explanation. We know that the elderly are reluctant to spend their savings, but what if someone else in the family is doing the spending instead?

Families who receive inheritances certainly spend more. They can pay off the mortgage quicker, go on a nice foreign holiday, or give the teenagers some extra cash to help them through college.

Research by Weil in the US found that families there increased consumption by an average 10 per cent once the nest-egg from granny arrived. More intriguing, families who anticipated an inheritance, raised their spending by around 5 per cent before the windfall even arrived.

So the middle-aged couple with their two kids and their mortgage, seeing that their parents have no intention of blowing their savings on world tours or trinkets, spend the cash for them in advance. Could this be the reason old people keep saving while nations with lots of old people still save less?

The statistical evidence to back up the Disney/Weil thesis may not be there yet, but the anecdotal evidence is pretty good.

Anyone else anticipating a boom from services for a grey generation should think again. The big spenders of the future may turn out to be exactly the same selfish consumers in their youth and middle age. Forget double- sized menus and invest in roller-blades after all.

Start your day with The Independent, sign up for daily news emails
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Guru Careers: Communications Exec / PR Exec

£25 - £30K: Guru Careers: We are seeking a highly-motivated and ambitious Comm...

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

Day In a Page

On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific
In this the person to restore our trust in the banks?

In this the person to restore our trust in the banks?

Dame Colette Bowe - interview
When do the creative juices dry up?

When do the creative juices dry up?

David Lodge thinks he knows
The 'Cher moment' happening across fashion just now

Fashion's Cher moment

Ageing beauty will always be more classy than all that booty
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination

Health fears over school cancer jab

Shock new Freedom of Information figures show how thousands of girls have suffered serious symptoms after routine HPV injection
Fifa President Sepp Blatter warns his opponents: 'I forgive everyone, but I don't forget'

'I forgive everyone, but I don't forget'

Fifa president Sepp Blatter issues defiant warning to opponents
Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report

Weather warning

Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report
LSD: Speaking to volunteer users of the drug as trials get underway to see if it cures depression and addiction

High hopes for LSD

Meet the volunteer users helping to see if it cures depression and addiction
German soldier who died fighting for UK in Battle of Waterloo should be removed from museum display and given dignified funeral, say historians

Saving Private Brandt

A Belgian museum's display of the skeleton of a soldier killed at Waterloo prompts calls for him to be given a dignified funeral