UK companies are facing big cost increases in their employee insurance premiums as the average age of their employees continues to rise. Research from Towers Watson shows that when a company's average employee age rises by five years its Group Income Protection insurance premium could increase by as much as 50%.
The company also found a similar link between workforce age and insurance cost for Group Life Assurance cover and Private Medical Insurance.
Towers Watson suggests that a change in the average employee age from 35 to 40 could result in a 40% increase in premium costs for Group Life Assurance, with the cost continuing to increase as the organisation's average age rises. A 40 to 45 average age rise could result in a 50% premium increase and a 60% increase if the average age rises from 45 to 50.
Philip Percival, head of Towers Watson's FiT Age programme, said:
"It's no secret that employees are starting to work later into their 60s and 70s and this is having an impact on the average workforce age in many companies. The additional liabilities and costs associated with this shift can take organisations by surprise if they are not prepared.
"Understanding the financial situation of a workforce is very important for companies wanting to gauge if and when older employees are likely to retire. While many organisations are benefiting from the experience and knowledge associated with older workers, they may not have a clear picture of the overall financial situation of their employees, leading to impaired workforce planning. However, by informing and educating workers early on about how to achieve the retirement income they want, companies can help reduce their own costs and liabilities."
According to further research by Towers Watson, nearly a quarter (23%) of UK employees currently expect to work until the age of 70 or beyond. Evidence from the Office for National Statistics (ONS) also supports the view that the UK workforce is getting older. It found that at the end of 2011 there were just over 870,000 people aged 65 or over in the UK workforce. By mid-2014 this had increased to 1.1 million and ONS predictions reveal the number could hit nearly two million by 2021.