Edison Explains: The ageing society – a structural shift investors cannot ignore

Why does an ageing population matter?

Most investment themes depend on something going right: a technology gaining adoption, a policy being passed or economic growth accelerating. Ageing is different. It requires nothing more than time passing. United Nations data shows the over-65 population growing by a billion people over the next 30 years and by 2050 roughly one in five people globally will be elderly. Fertility rates have already fallen below replacement level across most developed economies, while life expectancy, which stood at 32 years in 1900, now averages 73 worldwide.

The European Central Bank’s (ECB’s) May 2025 financial stability review sets out the implications: shrinking labour supply, slower productivity growth and mounting fiscal pressure as the tax base contracts. In Germany, younger parliamentarians have questioned whether a shrinking workforce can sustain generous retirements. That tension is an early signal of the structural strain that ageing economies will increasingly face.

Which sectors stand to benefit?

The investment case follows from where ageing creates the greatest unmet need and nowhere is that clearer than in healthcare. Alzheimer’s disease cases are expected to grow from 55 million today to more than 139 million by 2050, according to the World Health Organization. Alzheimer’s is a condition that, until recently, carried a 99% failure rate in drug trials. However, as outlined in our recent central nervous system report, a number of technological breakthroughs, such as Denali Therapeutics’ (Nasdaq: DNLI, c $3.2bn market cap) transport vehicle platform, Roche Holding’s (SIX: ROG, c CHF286.8bn market cap) Brainshuttle technology, Aliada Therapeutics’ (part of AbbVie, NYSE: ABBV, c $417.0bn market cap) Modular Delivery platform and BioArctic’s (STO: BIOA-B, c SEK26.6bn market cap) BrainTransporter technology, are leading to renewed interest in the sector.

The broader geroscience field is attracting capital in the same spirit, with BioAge Labs (Nasdaq: BIOA, c $870.3bn market cap) targeting the molecular drivers of immune and metabolic ageing through a large multi-omics dataset and Voyager Therapeutics (Nasdaq: VYGR, c $230.7bn market cap) advancing gene therapies for neurological conditions including Alzheimer’s and Parkinson’s disease. The global Alzheimer’s disease therapeutics market size is anticipated to reach $15.2bn by 2030, according to Grand View Research.

Beyond the clinic, elderly care services, financial planning, nutrition, beauty and leisure can be identified as structural growth segments, each driven by an expanding cohort of older adults with significant wealth and growing age-specific needs. Morgan Stanley estimates the number of US residents in assisted-living facilities will grow from 1.7 million today to 2.1 million by 2030, highlighting the growing importance of long-term care infrastructure.

The UK care home sector faces an acute and worsening supply-demand imbalance. The sector provides a substantially non-discretionary, essential service that is largely independent of the wider economy and driven by powerful demographic trends.

The number of people aged 85 or over is forecast (according to LaingBuisson’s Care Homes for Older People UK Market Report, 35th edition) to double over the next 25 years to 3.4 million, with many having increasingly complex care needs that make it difficult for them to live at home. This provides a long-term demand backdrop for companies such as Target Healthcare REIT (LSE: THRL, c £638m market cap), Social Housing REIT (LSE: SOHO, c £289m market cap) and Primary Health Properties (LSE: PHP, c £2,702m market cap)*. Please see our report on critical social infrastructure for further details.

How is technology reshaping care for older people?

The World Economic Forum estimates that slowing age-related diseases to increase life expectancy by just one year would be worth $38tn to the global economy, illustrating how small improvements in health can translate into substantial economic value.

According to Ignitec, the global internet of things (IoT) healthcare market (valued at $46.0bn in 2023) is projected to reach $305.6bn by 2032 as care shifts from hospital-centric to home-based models. Essence SmartCare’s IoT platform illustrates this transition by enabling smart preventive care and faster emergency responses. The shift from reactive to predictive care is where the real value lies. NVIDIA’s co-innovation AI laboratory with Eli Lilly and Company (Nasdaq: LLY, c $896.1bn market cap) and its clinical AI partnership with Mayo Clinic are laying the computational infrastructure to support the development of foundation models in pathomics (an innovative interdisciplinary field that combines digital pathology and AI), drug discovery and precision medicine. Recursion (Nasdaq: RXRX, c $1.9bn market cap) is applying one of the world’s largest proprietary biological datasets to compress drug discovery timelines.

In care delivery, Intuitive Surgical’s (Nasdaq: ISRG, c $178.5bn market cap) Da Vinci robotic systems improve surgical precision, while potentially extending the working lives of surgeons, a meaningful advantage amid workforce shortages. Cochlear’s (ASX: COH, c A$12.2bn market cap) Nucleus Nexa smart implant and GN Hearing’s Auracast-integrated hearing aids reflect a broader shift toward connected assistive technologies embedded within wider care ecosystems.

What does the ageing society mean for financial services?

The financial consequences of longer lives run deeper than often appreciated. Morgan Stanley estimates a $400.0bn incremental revenue opportunity for wealth and asset managers by 2028, driven by 30 million baby boomers reaching retirement age within five years.

The more structural challenge is longevity risk, which is the growing probability that people will outlive their savings. Financial products designed for a world where retirement lasted a decade are ill-suited to one where it may last three and the industry is only beginning to catch up. The annuity market is entering a period of renewed relevance, driven by a wave of baby boomer retirements, higher interest rates and evolving consumer preferences around income certainty. The demand is driven by products like registered index-linked annuities and fixed indexed annuities, which offer downside protection and market-linked growth. Companies like Prudential (LSE: PRU, c £27.6bn market cap) and MetLife (Nasdaq: MET, c $48.2bn market cap) are expanding longevity-linked product suites in direct response.

Demographic nuance matters. Women live longer than men on average and increasingly control household wealth, with an estimated $54tn projected to transfer to widows, according to Morgan Stanley. This is driving demand for advice models and retirement strategies that reflect different life patterns, career interruptions and risk preferences. Firms that understand this shift and focus on investing in adviser diversity, tailored planning solutions and financial literacy initiatives may be better positioned to retain this growing client base. The financial services sector is not just a beneficiary of ageing; it is being asked to reinvent itself around a fundamentally different relationship between time, risk and income.

What are the risks investors should keep in mind?

The headwinds stem from the same demographic force as the opportunity. The ECB warns that rising labour costs, weaker productivity and deteriorating public finances could threaten stability if ageing-related spending is not addressed. In the UK, the Financial Times estimates that 437,000 workers over 50 exit key growth sectors each year, costing £31.0bn in lost output, including £11.5bn in foregone tax revenue, more than half the country’s £22.0bn fiscal shortfall.

Pension and insurance models face structural strain as life expectancy rises and guaranteed returns become harder to sustain. Politically, Samuel Moyn’s Gerontocracy in America argues that wealth concentration among older generations is becoming a new democratic fault line, potentially driving policy shifts on inheritance tax, pension reform and financial repression.

The ECB adds a market-level concern: if older investors’ reduced appetite for risk is not offset by younger-generation demand, the result could be structurally lower equity valuations over time. The ageing society is not a simple tailwind. It is a structural force that rewards careful positioning and penalises the assumption that opportunity and risk point in the same direction.

Edison insight

The world is getting older and the numbers are striking. By 2050, over-65s will outnumber children under five for the first time in history. However, the investment story is more nuanced than simple demographics. Healthcare innovation, from Alzheimer’s therapies to AI-assisted drug discovery, is opening markets worth hundreds of billions. Financial services face structural reinvention as retirement horizons lengthen and technology is quietly reshaping how care is delivered at scale. The opportunity is broad but so are the risks. Investors who treat ageing as a simple tailwind rather than a structural force demand careful positioning.

Megatrends: healthcare innovation, changing demographics, future consumer, changing nature of work, disruptive technologies, digital economy, automation and industrial innovation

* Target Healthcare REIT, Social Housing REIT and Primary Health Properties are all clients of Edison Investment Research