The Department for Work and Pensions has called on employers to facilitate working at an older age so over-50s benefit from the same opportunities as their younger counterparts.
Increased longevity is a well-known issue for pension schemes. In order to fund retirement, one of the solutions is for people to work longer, but due to a lack of flexibility many employers do not make that an easy task.
In mid-2014 the average age exceeded 40 for the first time. And by 2040 nearly one in seven people is projected to be aged over 75, according to the Government Office for Science.
‘Retain, retrain and recruit’
The government’s Fuller Working Lives strategy aims to encourage people aged 50 and over to take advantage of the benefits of work, including a second career, due to the social and health benefits of being in employment longer.
The government should consider a more flexible system that would allow people to claim their state pension earlier, but receive a little less
Jon Greer, Old Mutual Wealth
It urges businesses to “retain, retrain and recruit”, highlighting the fact that, due to their age, some people are overlooked for roles that would suit them well.
In light of the government’s recent publication of the white paper on Brexit, Jon Greer, retirement expert at Old Mutual Wealth, noted that “the government is beginning to consider the more subtle impacts of Brexit on the UK”.
Brexit's effect
One of these, he said, “is how it will weaken the already strained old age dependency ratio – the number of people of a pensionable age for every thousand people of working age”.
Greer highlighted the fact that “recent analysis from Oxford University shows that immigration has helped to keep the old age dependency ratio in check”.
“This has not gone unnoticed by the Department for Work and Pensions… However, more reforms are needed and the upcoming review of the state pension age is a key to finding sustainable solutions,” he noted.
Greer mentioned that the UK’s current state pension system includes a universal state pension age that assumes people will all be ready to retire at the same age. “The government should consider a more flexible system that would allow people to claim their state pension earlier, but receive a little less,” he suggested.
“The administration of this system will be complex, but it would give people the ability to build a blend of retirement income that includes some form of employment,” he added.
Improve flexibility
Dan Jones, director of innovation and change at charity the Centre for Ageing Better, welcomed the government’s call for action. “There is a large group of people over 50 who want to work and in many cases are not able to,” he said.
Furthermore, many people make a choice to retire and are well prepared financially, but “that’s not the case for all of them”, said Jones. “People struggle to get back into work if they’re out of work above 50,” he added.
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“Regardless of age, people want opportunities to learn and develop and progress. They are less likely to get those opportunities later in life,” said Jones. To improve the situation, he said that it “is about employers changing their practice, changing appraisals, changing the way that they develop and grow staff”.
Older workers and pensions – what you need to know
Employment of older workers has grown significantly: a recent Department for Work and Pensions study revealed that during the past 30 years, the employment rate for people aged 50-64 has reached nearly 70 per cent from just over 55 per cent, and for over-65s has more than doubled to 10.2 per cent.
“As people age, they are more likely to have health needs and care responsibilities, and so flexibility is increasingly important,” added Jones. If people are not supported in these areas, they are much more likely to have to cease working, he explained.
Rachael Saunders, age at work director at Business in the Community, one of the Prince’s Charities, said: “It’s great that the government is now clear that there’s a real need for people to work longer” because “we’re going through a period of cultural change in this country”.
She added: “We need a whole range of public policy interventions, from health… to housing, to ensure that everybody is able to make the most of the longevity revolution.”
Tom Selby, senior analyst at AJ Bell, said: “Ageing populations represent the biggest social and economic challenge of our times. While many of the baby boomer generation will enjoy long retirements gilded by final [salary] pensions, future generations building up defined contribution pensions will be more likely to work longer if they want to sustain their lifestyle in old age.”
