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| Sunday, 27 July 2003 |
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The challenges and opportunities posed by the ageing population Sri Lanka's ageing population is likely to pose some challenges as well as opportunities and the best solution to the problem will come through the participation between the private and public sectors. According to Dr Shantha Yahanpath, Principal of Agape International, a Sydney-based management and investment consultancy, private sector institutions can increase their role in developing and delivering products and services to this increasing 'retirement market'. The private sector may not find commercially viable solutions attractive enough to serve the bottom end of the market. However, if its involvement reduces the strain on government finances in providing benefits to the middle-income group, the State and NGOs can focus on the lower income groups. The government provides retirement benefits to a large part of the population, but the benefits paid (and to be paid) exceed the means of State-controlled pension funds (unfunded liability). There are more people without any reasonable retirement income because they have not been State employees or members of a reasonable pension fund. Benefits from accumulated benefit schemes are unlikely to provide sufficient retirement income for most members, Dr Yahanpath said. Against such a backdrop, the government continues to pay benefits from its income (tax). There is already a significant unfunded liability, which is likely to increase with the current demographic change. He said that with careful planning and thinking beyond the traditional banking paradigm, banks can re-position themselves to profitably serve the 'retirement market' while helping reduce public expenditure in the sector. If they look beyond their traditional role as financial intermediaries, the ageing population will present attractive opportunities. It will be a growing market segment with accumulated wealth. The challenge is to unlock the full commercial potential of this market. Some areas of interest in the middle and upper-middle segments are retirement planning products, wealth creation strategies, lifestyle financial planning, reverse mortgages, annuities, pensions, residential accommodation units including retirement villages, self-care units, nursing homes, health insurance and geriatric care. Banks can partner with other private and public sector institutions in some of these areas. The new banking paradigm will have to move beyond 'bancassurance' to serve all customer needs. To provide a total solution to customers, a bank will not have to develop all these solutions, but it would require a good platform to deliver them and strengthen customer relationships. Dr Yahanpath is also investment strategist of Agape International's strategic alliance partner Eriksen Actuarial Pty Ltd and works closely with Pacific Rim Capital LLP, USA on mergers, acquisitions and private equity fund raising. As founder and principal of Agape, he consults in banking, insurance, pensions funds, investment strategy and mergers and acquisitions. |
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