‘Death of retirement’ warning: Working past 65 to become a ‘necessity for many people’

Thérèse Coffey confirms they are 'not reviewing state pension age'

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Pension plans were upended throughout 2020 as coronavirus forced workers and companies alike to reevaluate their finances. Today, the DWP released a report which showed “people aged 50 years and over have, like other age groups, been impacted in the labour market by the COVID-19 pandemic since March 2020.” Becky O’Connor, the Head of Pensions and Savings at interactive investor, examined the data and warned despite recent trends, workers may be forced to give up on the idea of retiring.

Ms O’Connor explained: “The Government has renamed the ‘Fuller Working Lives’ agenda to become ’50 PLUS: Choices’, which still feels like a euphemism for the death of retirement.

“Working in later life, particularly past state pension entitlement age, is more often likely to be a necessity rather than a choice. Although many people do like working if they are fit, well and have no other caring responsibilities, others would much rather be easing back and focusing on enjoying their later years.

“Covid has meant that many older workers who need income from employment have less money coming in. As well as affecting their current living standards, this will also affect their ability to continue to put money aside for eventual retirement.

“The hope is that this Covid-related trend will reverse, however that depends on employers re-hiring older workers. But it can be difficult to successfully apply for certain jobs once you reach a certain age.

“It’s really important that older people who both want to and can work have access to jobs, particularly as the state pension entitlement age has risen and so too will the minimum pension age in the coming years.

“It’s also important that those who cannot work, perhaps through health or caring needs, are able to keep their heads above water.

“Pensions are designed to get people through retirement – they might not be enough, after they become accessible in someone’s mid-fifties, to meet financial needs through the end of their working life, too.

“If older people who have lost jobs are now using some of their pensions instead, this could spell trouble further down the line, when they are trying to make their pot last. This makes it even more vital that people have access to information and products that helps them both build their pension through working life and preserve their pension through retirement.

“This data showing longer working lives comes after the introduction of the Health and Social Care levy – which will also hit older workers. So not only do more people have to work for longer, they have to pay tax for longer, too.”

Today’s report from the DWP showed the average age of exit from the labour market fell in 2020, for both men and women.

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Sarah Loates, a Director at Loates HR Consultancy, responded: “It’s too early to know whether the slight fall in the average age of exit from the labour market and reduced employment rate among people aged 50-64 over the past year is a short-term blip or the beginning of a longer-term trend where older workers are seen as less relevant in the post-pandemic world of remote working.

“This would be a dangerous and economically damaging development, as older employees are a goldmine of skills, pragmatism and lived experience, all of which contributes to team diversity and productivity. It’s important that employers focus on knowledge transfer between younger and older employees to prevent organisational knowledge loss, and capture that precious corporate memory.”

The same data showed over 790,000 people aged between 50 and 64 years are either actively seeking work, or are inactive but are willing or would like to work.

Claire Taylor, the Founder at Rasberry Flamingo Copywriting And Content Marketing, commented on this, noting how older workers are an unappreciated resource.

“As a 53-year old who owns her own business I can hand-on-heart say people are working longer due to pensionable age and the lack of savings for that generation, she said.

“On the upside, I find that employing people over the age of 50 has huge benefits as they have a work ethic unlike no other, and they have life experience that they can apply to their roles that makes them more rounded and considered. You get better with age, not worse!”

Helen Morissey, a senior pensions and retirement analyst at Hargreaves Lansdown, examined what needs to happen within the employment world to support older workers: “We would hope this is a short-term blip related to the pandemic and that people in these age groups can secure further employment rather than being forced into an early retirement.

“Working up to, and even beyond the age of 65 is a necessity for many people if they want to enjoy a comfortable retirement. We are living longer and will likely have to work longer as a result – very few people can afford to retire at the age of 50 and the age at which people can access their state pension is increasing. Early exit from the labour market can have a huge impact on people’s financial resilience as they miss out on what is for many people a sweet spot where their earnings and disposable income are high and they can afford to make real inroads into their retirement planning.

“Working into retirement can also provide a significant boost to people’s retirement income, while others continue to work for longer through choice. We have seen the number of over 65s in work rise from 424,000 in 1996 to around 1.28 million in 2021 – it is vital that the employment prospects of older workers are not damaged long term, not least because of recent government announcements that earned income from those over state pension age will be subject to the 1.25 percent Health and Social Care levy.”

Retirees will also see their incomes hit by Government changes in other areas. This week, the DWP confirmed the triple lock rules would be temporarily suspended to ease Government costs.

The state detailed payments will still rise next year, averaged wages will not be factored in. Wage rates were expected to increase state pension payments by around eight percent in 2022 but this will no longer happen.

While the DWP assured this is a temporary measure, some fear the triple lock will never fully return, as James Andrews, a senior personal finance editor at money.co.uk, detailed: “Whatever they say, more change is coming. It’s quite simply mathematically impossible to maintain the triple lock indefinitely, with the promise guaranteeing pensions will cost the Government more and more every year regardless of what happens to the taxes coming in.

“A single year’s suspension might cover a statistical anomaly, but it does nothing to answer the bigger question.”

Additionally, with the new social care levy plans, Boris Johnson confirmed pensioners will have to pay the increased rates of National Insurance even after reaching state pension age.

Under previous rules, retirees were no longer required to pay National Insurance once they reached state pension age.

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