Likewise, it is becoming increasingly evident that the generations coming up behind these retirees are not quite as well off, or prepared to use leverage as perhaps their parents were, which is just one of the reasons Frida'ys confirmation by HMRC that pension savings can be passed through multiple generations, free of the 55% ‘death tax’ and other inheritance taxes is likely to be welcomed.
But, what is perhaps more surprising is the manner in which wealth and fund managers are taking advantage of these changes.
Simon Edelsten, manager of the Mid Wynd Investment Trust and the Artemis Global Select Fund told Portfolio Adviser recently: "I don’t think people have worked out how important the spending power of this older cohort is going to become, especially when viewed in light of the fact that young people are not the consuming force they once were.
“I think there is an underestimation of just how big a consumer force the baby boomers are,” he added.
To this end, the growth in retiree spending power is one of the main themes Edelsten is tracking within the fund, although he does acknowledge that it is often hard to identify firms that service only this demographic – especially within the consumer space.
“You would be hard pressed to find a high street retailer that explicitly markets to over 55s, but many are doing so in more subtle ways,” he said. For example some firms are beginning to use older models in their ad campaigns and are starting to cater to the ‘fuller figure’.
One firm Edelsten has recently bought into that plays into this theme are French firm Essilor, which is the world’s largest maker of glasses and is benefitting not only from the poorer eyesight that comes with old age, but also from the growth within emerging markets as people come into the middle class and can, for the first time, afford eye wear.
“The problem with many of the firms that produce things that old people consistently spend money on, is that many have been doing so successfully for years and, as a result, are often at a pretty hefty rating. In the case of Essilor, the market knocked them back a bit in the summer for not being quite as successful as they have been in the past and brought the stock back to a more reasonable level.”
Andrew Herberts, head of private investment management (UK) at Thomas Miller Investment, is also buying into the retirement theme.
In the UK, wherein TMI invests into equities directly, this takes the form of pharmaceutical stocks and retailers like the N Brown Group that provide clothes for the ‘fuller figure’.
He said he is also looking into the financial services sector, as he expects asset and wealth managers to benefit from the growing need for retirement advice and the fact that people are now taking more and more control over their own retirement plans.
More globally, he is also considering the shifting demographic patterns and the increasing demand for protein as much of the emerging world moves into the middle class.
This he is accessing through agriculture funds of Electica and Sarasin, as well as Pictet's global megatrends selection.
The other key point, in playing this trend, Edelsten said is not to assume anything. For example, golf has long been associated with retirees and is often seen as a good way of getting into the sector. But, this he says has been a bad play.
“It has been vital to look at the consumption data, because it directed us toward areas where growth is increasing, such as outdoor lesiure.
"Everyone saw the growth in retirees coming, but I think few people expected them to be as active as they are. It is not just a change in demographics, it is the change in longevity that has come as a surprise.”
For example Edelsten points out, between 2001 and 2011 in the US there has been a significant increase in the number of people over the age of 55 that go hiking and ride bicycles, Which is why he is invested in companies like Shimano, The North Face and Asics.
