Trends and dilemma’s in an aging society Martin van Rijn, CEO PGGM March 11th 2011
Roadmap • PGGM in a nutshell
• Societies in transformation… • … and the impact on collective schemes • The strategy for a pension service provider
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• Cooperative: 561.000 members • Originates from (20) pension schemes in health care and social services sectors • Institutional clients: 5 • Pension service provider (not the fund!): 2.3 mln participants, €101 bln AUM • Yearly turnover (2009): €250 million • No 2 in Netherlands, No 3 in Europe
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Societies in Transformation 2010
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2030
2050
Trends and developments • • • • • •
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Ageing and vitality Public domain under pressure Global shift Exponential times Economical circumstances, post crisis Communalization and other social cultural trends
Facing the challenges of the future Developments… • Ageing →
…have effect on: health, pensions
• Technology
→
health
• Social-cultural
→
health, pensions
• Productivity-gap →
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health and other public services [Baumol Law]
The importance of a sustainable public domain • The need to meet forthcoming challenges – Increasing burden on resources (finances and capacity)
• The need for public support for solidarity – Between low and high income (income equity) – Between the healthy and the sick (risk equity) – Between generations (intergenerational equity)
• The need to focus on efficiency
In order to maintain/improve the current level of public services in an affordable manner. 7
Impact on collective schemes
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Ageing and pensions • First pillar (state pensions): – PAYG and therefore increasing burden on society
• Second pillar (mandatory supplementary pensions): – Funded, but increasing life expectancy has impact on DBsystem
• Third pillar (voluntary schemes): – Relatively small, but growing in importance
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Ageing and healthcare • More expensive healthcare: 1. Pressure on public finances 2. Pressure on solidarity
• More demand 3.
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Increasing need of labour force capacity
1. Pressure on public finances: Primary expenditures of the public sector (in % change 2006-2040)
Due to ageing
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2. Pressure on solidarity: increase of risk solidarity (current prices) Curative care
2006
Share of net beneficiaries
16%
→
13%
€17,8 bln
→
€ 43,3 bln
€1.720
→
€3.780 (+120%)
Yearly solidarity transfer
Average per capita payment of netcontributors Long term care Share of net beneficiaries Yearly solidarity transfer Average per capita payment of netcontributors
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2026
2006
2026
6%
→
10%
€16,0 bln
→
€34,2 bln
€1.380
→
€2.870 (+108%)
The need for solidarity increases, but the support is under pressure…
• Ongoing individualization • The healthcare costs incurred further to lifestyle (and hence at least partially controllable) will be greater and more visible • Fear of basic cover being restricted • Image of a sector that squanders money (not providing value for money) 13
3. Increasing need of labour force capacity Labour force in Health Care Sector as % of Total Labour force 22% 20% 18% 16% 14% 12% 10% 1996
1998
2000
productivity grow th 0%
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2002
2004
2006
2008
2010
2012
productivity grow th 1% and 0,5%
2014
2016
2018
2020
productivity grow th 2% and 1%
The strategy for a pension service provider
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The future of health care effects also our members • Health is a social goal; it brings prosperity to citizens and people state health as their most important value. • A healthy society helps economy, e.g. (1) as healthier workforce, (2) healthy people spend and therefore stimulate economic growth, (3) health correlates with equity. • Our members are care providers and future users
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The importance for a membership organization Growing health care costs of PGGM-clients 2010
2030
Hospital
• • • •
€ 250 miljoen 270.000 ziekenhuisopnames 550.000 verpleegdagen 250 medisch specialisten en 800 verplegers nodig
• • • •
€ 950 miljoen 1.000.000 ziekenhuisopnames 2.000.000 verpleegdagen 950 medisch specialisten en 3000 verplegers nodig
GP
• • •
€ 23 miljoen 2.750.000 huisarts consulten 150 huisartsen nodig
• • •
€ 90 miljoen 14.000.000 huisarts consulten 480 huisartsen nodig
• •
€ 90 miljoen In totaal worden er 4,5 miljoen medicijndoosjes aan deze groep verstrekt.
• •
€ 350 miljoen In totaal worden er 17 miljoen medicijndoosjes aan deze groep verstrekt.
• •
€ 17 miljoen Meer dan een half miljoen fysiotherapiesessies 275 fysiotherapeuten benodigd
• •
€ 70 miljoen Meer dan 2 miljoen fysiotherapiesessies 1100 fysiotherapeuten benodigd
€ 650 miljoen Meer dan 7.500 PGGM deelnemers in een bejaarden of verzorgingstehuis 20.000 deelnemers gebruiken thuiszorg 9.000 FTE’s verzorgend personeel
• •
Pharmacy
Fysiotherapy
• • •
AWBZ
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Long term care • •
€1.3 billion
•
• •
→
€ 2.500 miljoen Meer dan 25.000 PGGM deelnemers in een bejaarden of verzorgingstehuis 75.000 deelnemers gebruiken thuiszorg 32.000 FTE’s verzorgend personeel
€5.1 billion
Money is not enough “The problem is that within 20 years money as such is not the main issue. ……. the ageing has led to more retired people than people who can take care of them ……… instead of moneytransfer, financial providers deliver services and organize the care”.
(Bakas/Peverelli – The Future of Finance)
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Pensions, care and housing have similar ‘careers’ AGE → AGE →
Pensions
Health status
Housing
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18-30
30-55
55-65
Saving (related to income)
Healthy
Solo/ Duo
Family
65-75
>75
Withdrawal
Minor complaints
Limited
Empty nest
Modified
The future of pensions: New old age
Housing
Health
Pension
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What do we need? • Consistent development in public domain • New legislation • Alliances with similar organisations
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