Dementia Costs Add To The Demographic Time Bomb

09.11.10

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Dementia will cost the world ?388 billion in 2010, the equivalent of 1% of global gross domestic product (GDP), the World Alzheimer Report 2010 on the Global Economic Impact of Dementia reveals. T

Dementia will cost the world ?388 billion in 2010, the equivalent of 1% of global gross domestic product (GDP), the World Alzheimer Report 2010 on the Global Economic Impact of Dementia reveals. The cost will soar as the number of sufferers doubles by 2030 and more than triples by 2050. Governments around the world will have to find extra billions to fund dementia alone, on top of other expensive issues related to longevity, such as the cost of pensions and long-term care.

The Report issued on World Alzheimers Day (21st September) by Alzheimer's Disease International (ADI), provides the most current and comprehensive global picture of the economic and social costs of dementia. It reveals that the costs of caring for people with dementia are likely to rise even faster than the prevalence, especially in the developing world, as more formal social care systems emerge and rising incomes lead to higher opportunity costs.

Reports from individual countries such as the UK suggest that dementia is one of the costliest illnesses – and yet research and investment is at a far lower level than for other major illnesses.

This is a wake-up call that Alzheimer's disease and other dementias are the single most significant health and social crisis of the 21st century,” said chairman of ADI, Dr Daisy Acosta. “World governments are woefully unprepared for the social and economic disruptions this disease will cause.

The research illustrates that if the cost of dementia care is compared to a country it would be the world?s 18th largest economy. If it was a company, it would be the world's biggest by annual revenue, way above Wal-Mart (US$414 billion) and Exxon Mobil (US$311 billion).

ADI estimated that worldwide 35.6 million people currently have dementia, which will increase to 65.7 million by 2030 and 115.4 million by 2050. About 70% of the costs occur in Western Europe and North America.

In the UK there are about 750,000 people currently living with dementia and some ?20 billion a year is spent on care ? more than on heart disease and strokes combined. The number of sufferers is set to reach a million within a generation.

The Report recommends that governments worldwide make Alzheimer's disease a top priority and act urgently to develop national plans to deal with the social and health consequences of the disease. The UK, France and Australia have moved forward in developing national plans and it is critical for other governments to follow suit.

Funding for research must be increased to a level more proportionate to the economic burden of the condition. Recently published data from the UK suggests that a 15-fold increase is required to reach parity with research into heart disease, and a 30-fold increase to achieve parity with cancer research.

In a report by the International Monetary Fund on ?Long-Term Trends in Public Finances in the G7 Economies?, director of the IMF?s fiscal affairs department Carlo Cottarelli, warned that reforming healthcare systems for developed economies would be ?the fiscal challenge of the 21st century?. Healthcare spending has surged in many G7 countries, accounting for more than two thirds of the increase in the primary spending ratio in the US and more than half in the US, Canada and Germany.

The report continued that major additional pressures on public finances are arising from pension and healthcare spending but the nature of these pressures is often misunderstood. ?There has been a great deal of emphasis on pension spending, but much less on the rising trend in healthcare spending,? it stated.

In the G7 economies, without reforms, pension spending would have increased from 7 to 10 percentage points of GDP in the next 20 years. The ?Ageing Report? by the European Commission projects spending would rise by 0.8 percentage points over the next twenty years, but if spending on healthcare is included government spending on age related issues would be about 3% of GDP until 2030.

In the UK the Institute of Economic Affairs (IEA) has calculated that the UK gross national debt is ?4.8 trillion when pension liabilities are factored into the calculations. In August, the Office for National Statistics reported that the UK?s national debt was ?816 billion but director general of the IEA, Mark Littlewood, said these figures are ??seriously misleading. Looming in the background are pension liabilities, these should be moved to the forefront. A more accurate picture of the situation shows that Britain finds itself saddled with a national debt of nearly ?5 trillion.?

According to the official figures the UK?s national debt increased from 48% of GDP in July 2009 to 56% GDP in July 2010. Littlewood said the real figure is closer to 333% of the GDP.

Governments would find it hard enough to deal with the increasing longevity costs at the best of times, but coming on top of the financial crisis it is an even bigger challenge.

In its quarterly Sovereign Monitor published in August, Moody?s warned that ?genuinely adverse debt dynamics were only expected to materialise in 15 to 20 years. The crisis has ?fast forwarded? history, eroding all the time available to adjust?. It explained that after the Second World War the young economies were able to outgrow the debt spikes but this time the threat lies ahead as the aging crisis drives up pension and health costs on a static tax base. ?While the current stock of debt is large, it is dwarfed by the accumulation of future liabilities if policies do not change?.

Governments need to find the funding for soaring healthcare and pension costs and it is possible they will have to do so with more tax increases, additional taxes and more spending cuts. Individuals also need to prepare to part finance their health and social care in later life and, if required, to find ways to increase their income in retirement to keep them in a comfortable and relative healthy lifestyle.

A strategic investment programme can provide a regular income and capital growth as well as tax planning opportunities to give you peace of mind for the future. A tax and wealth planning specialist like Blevins Franks can advise you on the appropriate structures for your specific aims and objectives.

By Bill Blevins, Managing Director, Blevins Franks

25th October 2010

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.

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