Just under half (49 percent) of UK workers are confident they will still be able to do their job when they reach 70, yet many people will need to stay in work for financial reasons.
Research from Phoenix Insights, Phoenix Group’s longevity think tank, shows that retirement ages have crept up over the years. This is because employees start and finish their careers later, they are living longer, and there have been changes to pension age eligibility.
Around one in three 65-year-olds are officially retired today compared to 30 years ago when it was closer to three in four (73 percent).
Undersaving for retirement is one reason people are working later in life.
Modelling from the think tank suggests around 17 million adults are not on track for the retirement income they expect or need. Researchers predict that the saving crisis will reach “boiling point” for new retirees in the 2040s.
However, the question of whether people will be able to work or not is the elephant in the room. The think tank’s research found that among people who are not confident they can stay in work the main concerns are around physical and mental health, motivation and a lack of support for older workers. A fifth (21 percent) of this group are also concerned about age discrimination in the workplace.
But the combination of widespread undersaving and an increasing state pension age could mean many more people will have to postpone their retirement. Remaining in work, on reduced hours or full time, has the double effect of reducing the years they need to fund in retirement alongside enabling workers to continue to build up pension savings.
But Phoenix Insights emphasised that its research shows that not everyone is able to work into their late 60s and 70s. People in their early 60s make up a disproportionate proportion of the total workless population. If current trends continue, there could be an additional 770,000 people aged 60 to state pension age out of work by 2029, totalling 3 million.
The study said that being out of work pre-state pension age is closely linked to rates of poverty. A quarter of all 60-65 year olds live in poverty, and people out of work aged 60-65 are twice as likely to be in poverty as those in work.
In response to this looming issue, the think tank has called for action from the government and employers.
It wants to see a cross departmental government strategy that recognises the challenges and opportunities for over-50s, covering policies around retention, recruitment, training, support and health.
It called on employers to nurture an age-friendly culture by improving the promotion of inclusive employment practices such as flexible work, paid carers leave, and support for health and wellbeing.
Phoenix Insights also called for active career management to address the employment advice gap and support career moves, job changes and help people back into work. It said that a greater focus on lifelong learning and training would help to close the skills gap and increase adult participation in further education.
Government and businesses should provide better retraining opportunities and age inclusive advertising of green jobs, it said. The think tank also urged employers to review pay and conditions for green roles to attract experienced workers.
Patrick Thomson, head of research analysis and policy at the think tank, said: “How people enter, stay and leave work has transformed in recent decades. The average retirement age has increased by around five years since the 1990s and more people choose a gradual transition from work rather than having a ‘hard stop’.
“In the future, it’s possible average retirement ages will rise further alongside the state pension age rises as people want to continue working longer or feel they need to for financial reasons. In the next five years most defined contribution pension savers will enter retirement with savings below expectations or below an adequate level, and this will worsen to a peak in the early 2040s.
“While people may want to remain in work in their late 60s and 70s, it’s not always possible for some. Huge numbers drop out of work before state pension age and face barriers to re-entering. Without better support for this group to remain in work, an increasing state pension age and under saving creates a perfect storm for worsening later life poverty.”
