Category — Rethinking Retirement
20 April 2017
Help poorer pensioners, older women and families facing elderly care
- Radical overhaul of social care to ensure fairer system for all – a crisis worse than pensions
- State Pension triple lock could move to a double lock, increasing by prices or earnings
- Double lock should apply to Pension Credit so poorest pensioners are protected properly
- Improve pension outcomes for women – private pensions, State Pensions and WASPI
- Reform pensions tax relief to give everyone a 33% Government bonus on their contributions
- Encourage longer working life – mid/later-life training, career reviews, apprenticeships
Government plans for Brexit and the economy will dominate many people’s thinking, but a coming Election Manifesto needs to cover other important issues that will affect the lives of older voters significantly. Here’s some initial thoughts – a six-point plan to improve older people’s lives, while giving a more affordable, sustainable and fairer system for the future.
Here are my suggestions:
- Radical overhaul of social care to ensure fairer system for all
In terms of fairness, it is absolutely vital that the Government finally addresses the ongoing and worsening crisis in social care. The current system penalises elderly people and their families and lowers care standards, while raising the costs to those paying privately. It is undermining the NHS and places the biggest burdens on those who fall ill, rather than being shared fairly. There is no help for the poorest people with moderate needs, which makes it more likely that they end up in hospital or care homes and lose their independence.
Meanwhile, older people who do have savings have to lose everything, including the value of their home, before they get any state help at all. The draconian means-test coupled with council cutbacks, on top of rapidly rising numbers of elderly people in our aging population has caused huge strain on the social care and health services, undermining the quality of social care (such as only allowing 15 minute visits and low paid staff on zero hours contracts). The system is riddled with unfairnesses and is simply not fit for the 21st Century. Private payers who are denied state help end up paying over the odds for care, to make up for local authority underpayment. This penalises those families who are unlucky enough to need elderly care twice – firstly they get no help from the State and secondly they also have to pay extra to cover the costs of those who are covered by the State.
This amounts to a most inequitable stealth tax, hitting the most vulnerable in society. To add further to the unfairness, elderly people who are judged to have a health need, rather than social care need, will have all their care costs met by taxpayers. This arbitrary allocation of resources is unsustainable and is placing the NHS under intolerable strain, even before the huge bulge of baby boomers reaches advanced old age. Proper integration of health and social care is long overdue. It is obvious that the State cannot pay to look after all baby boomers who will need it in coming years.
There is no money set aside for this purpose and younger taxpayers will be unable to afford it. Therefore, incentivising those older people who have pensions, ISAs or other savings to earmark a sum to pay for care, while the State then covers the extra on top of that, would kick-start funding which is currently non-existent. Introducing a Dilnot-style cap on care costs, then allowing tax free withdrawals from pension funds if needed to pay for care, plus introducing a special Care ISA allowance (that can be passed on free of Inheritance Tax) or allocating some proportion of property value up to a limit of, say, £70,000 per person, would ensure baby-boomers have incentives to prepare for their coming care costs, while also signalling that everyone will need to think about providing for care in old age, as well as pensions.
- State Pension Triple lock could move to a double lock, increasing by prices or earnings
The triple lock commits to increasing (only some parts of the) State Pension by the highest of price inflation, average earnings or 2.5%. The 2.5% commitment contained in the triple lock adds billions to the cost (it is estimated that State Pension has cost £3billion more for the years 2010 – 2016 than if a double lock had been in place).
The longer the triple lock lasts, the greater the future cost will be, with official forecasts predicting it will add at least £15billion to the long-term cost of State Pension provision. The arbitrary 2.5% figure is a political construct with no economic or social logic. When it was introduced, the State Pension had fallen well behind average earnings, so it served a useful function in increasing basic State Pensions to a more reasonable level. But pensions have increased significantly relative to other benefits.
The Pensions Commission recommended only increasing State Pensions in line with earnings, but perhaps the Government should offer pensioners the higher of prices or earnings inflation, as a double lock, to protect against rises in the cost of living and average living standards of those in work. If other benefits are being frozen, or only protected by either prices or earnings, to add the extra 2.5% protection for pensioners will cause increasing resentment and also adds to pressure to increase the State Pension age faster, which disadvantages those with lower life expectancy and in poorer health. In addition to this, the new State Pension system has rendered the triple lock concept socially inequitable.
- Double lock should apply to Pension Credit so poorest pensioners are protected properly
The triple lock, in fact, contains inherent unfairness which will worsen in coming years as more younger pensioners receive the new State Pension. The triple lock does not actually protect many of the poorest and oldest pensioners because does not cover all State Pension payments.
It only applies to two bits of State Pension – the old Basic State Pension (up to around £120 a week) and the full new State Pension (up to around £160 a week, but only available to the youngest pensioners). Most importantly, it does not apply to the Pension Credit (which the poorest pensioners receive). A much fairer system would see the double lock protection extended to Pension Credit to help the oldest and poorest pensioners.
- Improve pension outcomes for women – private pensions, State Pensions and WASPI
Women lose out in pensions in many different ways and, although the Government has made some improvements, both State and private pensions policies still discriminate against women. As regards private pensions, women are losing out in workplace pensions. There are several reasons for this.
The gender pay gap means they earn less than men, so their pension contributions will be lower but recent studies also show that women work in jobs with lower employer contributions and on average their employers pay 1% of salary less into their pensions than for the typical male. Women also take career breaks which reduce their lifetime earnings. In addition to these factors, women are also losing out in auto-enrolment as they are more likely to be low earners.
Only people earning over £10,000 a year in any one job are auto-enrolled by their employer. So these lower earners lose out on their employer’s contribution and on the behavioural benefits of being automatically enrolled, even though they are the people who would probably most need better pensions and the behavioural nudge of being automatically enrolled. Many women work in multiple low paid jobs, in order to fit their work commitments around caring responsibilities. Even if these women’s total income is above £10,000, if they earn less than this in each job, they lose out on auto-enrolment completely.
The Government estimates that over 70,000 women are affected. These women are also more likely to be losing out in State Pensions too. The cracks in the National Insurance system penalise far more women than men. Those earning less than £5,876 a year in any one job get no credit for their State Pension, even if they have multiple low paid jobs that would bring their earnings over the National Insurance threshold. The Government estimates 20,000 -30,000 women are affected and they get no credit for their State Pension.
In addition, women who have children but are in households with incomes that disqualify them from Child Benefit have to claim the benefit even if they know they’re not entitled to it, otherwise they lose out on their State Pension credit too. All these wrinkles in the National Insurance State Pension system should be removed, so that women are no longer discriminated against in these ways. Finally, there are many WASPI women who were not properly notified of changes to their State Pension Age. The Government should recognise the hardship its failure to communicate properly has caused and should ensure those affected are able to receive some early payment, to compensate for the short-notice increase in pension age which they did not have time to prepare for.
- Reform pensions tax relief to give everyone a 33% Government bonus on contributions
The Government decided not to reform the current system of pensions incentives, that revolves around tax relief. The present arrangements are not understood by the majority of people, who don’t realise that 20% tax relief gives them a 25% Government bonus on their pension contributions, while higher rate taxpayers get 40% tax relief, which is a 66% bonus on their contributions.
Instead of confusing people with a Lifetime ISA that could also be used for house purchase, the Government should introduce a fairer system of pension incentives shared more fairly, with a 33% Government bonus being offered to everyone. The annual contribution limit would need to be cut from the current £40,000, and the Lifetime Allowance should be reformed or abolished. The freedom and choice reforms have made pensions the most attractive retirement saving option, but if the Government is serious about helping those in the middle or less-advantaged positions in society, then making the pension system fairer for all should be a priority.
- Encourage longer working life – mid/later-life training, career reviews, apprenticeships
If the Government is serious about controlling immigration, given the aging workforce it will also need to ensure that more older people stay engaged in the labour market than ever before. This will need a radical rethink of workplace practice, as well as greater encouragement of mid-life training, career reviews and apprenticeships.
Those who can and want to work flexibly as they get older should be supported positively, with employers required to ensure age is no barrier to ongoing training and re-skilling opportunities. Businesses should take the value of older members of their workforce more seriously and unlock the potential of older workers. This can boost the economy both now and in future, as people have higher lifetime incomes and opportunities to build up better pensions.
April 20, 2017 10 Comments
23 March 2017
Cridland Report emphasises importance of working longer but shies away from allowing early State Pension for those who can’t
Summary of my views:
- Yes it is important to help people work longer, especially after Brexit
- Yes Government should end the triple lock which doesn’t protect oldest and poorest pensioners properly anyway
- Yes we must tell people about any increases to their State Pension age
- Yes adults caring for elderly relatives need more help
- BUT I would go further in recognising differential work history and life expectancy by allowing early access
- Current system helps those who are healthy and wealthy enough to wait longer for State Pension, while giving nothing to those who genuinely cannot keep working
- People under age 45 will get no state pension until age 68.
- Just increasing state pension age prolongs disadvantage for occupations and regions with known lower life expectancy.
- I hope this review will help pave the way to end the increasingly unfair triple lock.
|Cridland is right to focus on helping people work longer, especially part time: I’m pleased to see the Review suggesting reforms such as later life training, mid-life career reviews and protection for carers, which I recommended as Business Champion for Older Workers. Retirement can be a process rather than an event, with people cutting down gradually rather than suddenly stopping and more help for people to stay in the labour market longer is important.
Brexit makes later working even more important: We should not force people to stay on and should recognise the wide variations in life expectancy across occupations and UK regions, but as we leave the EU and immigration falls, it makes sense to use older workers’ talents and lifelong experience more. This can boost the economy and their own future income.
But many people genuinely cannot keep working and State Pension currently doesn’t make allowance for this: Cridland highlights the vast differences in life expectancy across the UK – more than 15 years differential. Just as the Review recommends more flexibility is required by employers to facilitate part-time work for older people and help for the increasing numbers of workers who will need to care for elderly relatives, I believe more flexibility is also needed in the State Pension system.
Disappointing that Review decides against early access: People with shorter than average life expectancy generally still pay around a quarter of their salary in National Insurance. They may have worked for 50 years or more but may die before being eligible for any state pension – or may receive very little. This seems inequitable and their lower life expectancy is not recognised by our National Insurance rules. Normal insurance would usually charge lower premiums to such people but that does not happen. Therefore allowing early access could compensate for this even if for a reduced pension.
Current system only helps those who are healthy and wealthy enough to work longer: If someone can work beyond state pension age, they can get a much larger pension but there is no help for people to get their state pension earlier if, for example, they started work exceptionally young, perhaps in tough industrial jobs, and genuinely cannot keep going till nearly 70. Cridland recommends some means-tested help just one year before State Pension age but I think moving away from just one ever-increasing age, would be more socially equitable. A band of starting ages, such as between 65 and 69 with adjusted payments would be fairer.
Spurious accuracy of ensuring receipt of State Pension for ‘up to one third of adult life’: The aim of the Review was meant to ensure people spent ‘up to one third of adult life’ receiving State Pension. The Government Actuary’s Department figures vividly highlight the difficulties of such a vague target. Tiny changes in average life expectancy are shown to imply vast differences in timing of state pension age increases. Between 2012 and 2014, life expectancy fell a little, but that implied a 5-year change in the state pension age timetable. It does seem that targeting 33.3% of ‘adult life’ or 32% of ‘adult life’ is misleading, given the sensitivity to tiny changes in mortality and huge differences in life expectancy across the population. A range of ages would surely better cater for individual differences and allow some flexibility.
Problems for WASPI women show dangers of raising state pension age – lessons need to be learned: The Government also needs to learn from the women’s state pension age fiasco that it is essential to ensure people know about any state pension age changes in good time to prepare. Many older women are facing serious hardship as a result of Government failure to communicate with them and there has been no recognition of the damage this has caused so far.
Triple lock should be scrapped – it is a political construct that is increasingly unfair and leaves out oldest and poorest pensioners: I agree with Cridland that the triple lock should be abandoned after 2020. The triple lock is a political construct which purports to offer great protection while increasingly disadvantaging the oldest and poorest pensioners. The lock protects around £160 a week for the newest pensioners but only around £120 a week for older ones and it does not protect the Pension Credit at all which the poorest pensioners must rely on. The arbitrary 2.5% figure has no economic or social rationale. Cridland suggests linking the State Pension just to earnings but I would like to see some protection against inflation too if that is rising faster. There is a clear tradeoff between more generous pension increases and raising state pension age. Having the triple lock in place also puts more upward pressure on the state pension age which itself disadvantages poorer areas of the country and those in heavy manual occupations. So the unfairness and extra cost of the triple lock make it ripe for reform.
March 23, 2017 2 Comments
13 October, 2016
Here are my thoughts and comments on the Cridland State Pension age independent review: interim report.
As Cridland considers the options, Government has a chance to make State Pension policy fairer
Consider extending number of years for full pension, rather just than raising state pension age
- Current system gives higher state pension to people healthy or wealthy enough to wait and work longer, but often disadvantages those with longest working lives or poor health
- Continually increasing State Pension Age is not best way to control state pension costs
- State Pension is based on contribution principles – but 35 years is not a full working life
- Requiring longer contributions for full State Pension would allow long-service workers to get full State Pension sooner if they need to
- New State Pension rules has made state pension less fair – people may now pay full National Insurance for more than 15 years, for no extra State Pension
- Under old State Pension, people could build up more State Second Pension every year but new State Pension means no extra State Pension after 35 years
- National Insurance makes no provision for social care – Beveridge would have ensured such insurance
I am delighted to see that John Cridland has released his interim Report on how to manage State Pension Age policy in the long-term. I believe there are important issues that need to be opened up to national debate and it is good to see them starting to be aired. Cridland is right to focus on the three pillars – affordability, fairness and fuller working lives. These are all important issues and can help frame the way State pensions policy works better in future.
Current system gives higher state pension to people healthy or wealthy enough to wait and work longer, but often disadvantages those with longest working lives or poor health
The current State Pension system is increasingly seen as unfair. Those who reach state pension age in good health and with other private income can keep on working or waiting longer and achieve much higher state pensions when they do finally take them. Under the old system, people could get an extra 10.4% a year state pension for each year they delayed starting to take it. Under the new State Pension, people can still get an increase of 5.8% a year in State Pension if they can afford to delay their start date. By contrast, people who desperately need their state pension before they reach state pension age cannot receive any money at all and State Pension age has been rising sharply, as indeed has the age at which Pension Credit can start being paid to both men and women. This means the current system is penalising those who are in poor health, possibly due to having had very long working lives in physically demanding jobs. Socially, such a system seems inequitable and the groups with lowest life expectancy lose out significantly. This includes people in lower earning groups, but there are also major occupational, regional and income differentials in average life expectancy which have so far been ignored by the state Pension system. The current rules favour higher earners, living in more prosperous areas and who have less strenuous jobs, or are in good health. A balance needs to be struck between controlling costs and improving social fairness.
Continually increasing State Pension Age is not best way to control state pension costs – just look at the problems with Women’s State Pension Age changes
The Government should carefully consider whether just increasing state pension age is the optimal way to control costs. I believe there needs to be a different mechanism than purely using average life expectancy, or chronological age. A more considered approach would focus on length of working life and number of years contributing to the National Insurance system. At the moment, the dice are all loaded in favour of the healthier and wealthier members of society, who get more State Pension per year and for more years than other groups.
State Pension is based on contribution principles – but 35 years is not a full working life
The National Insurance State Pension has always been based on the contribution principle – if you contribute to the country for enough years, you will be entitled to a full State Pension. When Beveridge designed our system, he considered a full National Insurance record would be 44 years for men and 39 years for women. Since the 1940s, average life expectancy has increased significantly but the number of years for a full record is now only 35. If you have lived in the UK all your life, 35 years cannot possibly be considered a ‘full’ working life.
New State Pension rules has made state pension less fair – people may now pay full National Insurance for more than 15 years, for no extra State Pension
Those who left school at 16 would be just 51. Those who went to university and started working at 21 would be just 56. That means, people will be contributing National Insurance for many years, but will not get any more state pension at all. By contrast, those who have only lived in this country for part of their lives could get the same State Pension as people who have lived and worked here much longer – and paid far more into the National Insurance system overall. National Insurance contributions from both employee and employer amount to over 25% of average salary – yet no further pension accrual will be earned for this sum once people reach the 35 year threshold, meaning many people who did not go to higher education will be disadvantaged in the State Pension system.
Under old State Pension, people could build up more State Second Pension every year but new State Pension means no extra State Pension after 35 years
The unfairness of the State Pension system has been exacerbated by the new State Pension that started in April 2016. Under the new system the old rules that allowed people to keep on building some State Pension every single year have been abolished. Before April 2016, people could build up extra State Second Pension (S2P – the earnings related part of the State Pension) every year until they reached State Pension age. They would have built up a full Basic State Pension after just 30 years, but at least they could go on accruing more S2P each year, so their National Insurance contributions would give them some extra State Pension in retirement. (Those who were contracted out would be paying lower National Insurance and building up a replacement for this S2P in their private scheme).
Requiring longer contributions for full State Pension would allow long-service workers to get full State Pension sooner if they need to
Therefore, the idea of increasing the number of years required for a full State Pension makes sense. In future, rather than increasing State Pension age just because ‘average’ life expectancy has risen, it could be fairer to increase the length of time required for a full State Pension instead. If you reach State Pension age without a full record, you could still receive the relevant fraction of the State Pension – for example if you require 45 years and you have 40 years on your record, you would still get 40/45ths of the full amount.
Those caring for children or adults would still get credits towards their record, as would the unemployed or those who are too ill to work.
As with the current system, anyone who takes time out to look after their children or caring for older people, or unemployed or too ill to work would receive credits so that this does not damage their National Insurance record.
National Insurance makes no provision for social care – Beveridge would have ensured such insurance
The current National Insurance system is geared towards regular pension payments only. However, if Beveridge was designing the system today, he would certainly want to include an element of insurance to cover social care costs. Beveridge could not have imagined millions of elderly people living as long as they do now, being such a growing proportion of the population. In the 1940s, life expectancy was much lower and medical research had not developed to allow people to live with chronic conditions until much later.
The measure of ‘up to’ one third of adult life living on a state pension is far too crude. Given the vast differentials in life expectancy across the country and across occupational or income groups, this arbitrary measure hides significant unfairnesses. A more sophisticated and equitable approach is required.
October 13, 2016 2 Comments
28 July, 2016
- Important new Statistical Series released today to track trends in later life working
- Massive increase in labour force participation for over 50s since the 1980s
- Older women show largest employment rise while proportion age 70-74 in work has doubled
- Rise in female participation pre-dates increase in state pension age
There is a social revolution underway, which can benefit millions of people in the UK, which is seeing increasing numbers of over 50s stay in work, continuing to increase their lifetime income, improving the productive potential of the economy and in many cases ensuring a better quality of life. As older men and women realise it is not beneficial to aspire to retire when still relatively young, the trends in employment among people over age 50 are striking.
The DWP has today released figures that will form a brand new data set for the future. They will track the trends in later life working and help us monitor how the world of work is developing for the over 50s. The new statistical series shows changes in employment trends for women and men since the 1980s.
Following my role as the Government’s Business Champion for Older Workers and Pensions Minister, I have instigated continued statistical analysis of employment trends and engagement with business to help more people and employers benefit from the skills and experience of the more mature workforce that is on offer with an aging population. The statistics released today demonstrate the historical trends that have seen sharp increases in number of over 50s staying in work.
This is all part of a much wider exercise in encouraging people to keep working, if they can and if they want or need to, and encouraging employers to recognise the enormous value that older workers offer to their businesses.
People are not necessarily ‘old’, in a conventional sense, at age 50, 60 or 70 and are increasingly choosing to keep working. This can be good news for them, good for their employer and the economy too. It will boost their lifetime income and can also be better for their health and general wellbeing.
Of course, it is also true that some people cannot work longer, or feel forced to go on when they would rather stop, but this is the minority. Surveys that were part of my Business Champion for Older Workers report ‘A new vision for older workers – Retain Retrain Recruit’ showed that most people in their fifties want to keep working past their state pension age.
In 21st Century Britain, after all the successes in healthcare and working conditions, it makes sense to celebrate the increased employment of older people and to take advantage of the skills and talents of our aging population.
July 28, 2016 1 Comment
22 February 2015
- Having more over 50s in work is not a threat to younger people’s wages or employment – it is essential for economic progress
- Studies suggest more older people in employment improves employment and wages for the young
- In our ageing population, we should welcome higher employment levels for over 50s – if they shift to part-time that may depress average wages but is not a concern long-term
- Concerns about rising labour force participation by older workers being a threat to younger people are misguided – it is essential for economic progress
- Failure to encourage longer working lives will imply a larger tax burden on future generations, especially with the aging demographics and rising life expectancy
- More older workers leads to higher national income, higher national output and more jobs for younger generations
- We should welcome the rise in part-time workers in later life, which allows an extension of working life that can boost future individual and national income
Keeping more over 50s in employment does not mean fewer jobs for the young: There is extensive evidence showing that having more over 50s in work, is actually associated with both lower unemployment and higher wages for the young. A summary is in a Eurofound study by Rene Boheim [ http://wol.iza.org/articles/effect-of-early-retirement-schemes-on-youth-employment.pdf ] ‘The effect of early retirement schemes on youth employment’ which concludes that increasing retirement age leads to an increase in the wages and employment of younger workers. So it is in the interests of all of us to enable more older people to stay in work.
More over 50s staying in work is a major boost to our economic prospects: Concerns that later retirement has caused slow wage growth in the post-2008 recovery, despite sharply falling unemployment and the massive job creation of recent years, are misguided. Such simplistic analysis fails to factor in the impact of an aging population and the trend to flexible or part-time work as an alternative to traditional retirement. In fact, these trends are hugely beneficial to our economy and should be celebrated.
The demographics suggest we need to ensure older people are employed for longer: The statistics are startling. Over the next few years, there will be 3.7million more people aged between 50 and state pension age, but 0.7million fewer people aged 16 to 49. Put another way, estimates suggest there will be 13.5million more job vacancies in the UK, but only 7million school-leavers. This net shortfall of workers cannot be filled by immigration of 200,000 a year. With our aging population, business urgently needs to recognise the demographic inevitability – either more over-50s will work longer, or we face declining economic growth.
The contention that early retirement leads to more employment opportunities for young people depends on two assumptions, both of which are flawed: For example, this argument assumes older and younger workers are easily substituted for each other. In fact, the skills of older people such as life and job-specific experience, are generally different from those of younger people who have not yet experienced working life. Therefore, younger and older workers are not normally good substitutes for each other – indeed their roles are often complementary.
There is not a fixed number of jobs in the economy: It is not true that each older worker in a job denies employment to a younger person. This is not how economies work. There is not a fixed number of jobs. The more spending power in the economy, the more jobs can be created. If companies and individuals earn more, economic activity and employment can increase. In an individual company there may be a fixed number of positions, but only over the short-term. If business is good, the company can create more jobs – but if demand for the company’s goods or services declines, it will reduce the number of jobs. This also applies to the economy as a whole. So keeping more older people in work, means increasing national output, higher lifetime incomes and more money to spend in our aging population. Conversely, if more older people stop work, they will have lower spending power and ultimately there will be fewer jobs for younger people.
Having older people active and productive benefits people of all ages and ensures that more jobs are created: Younger people’s wages rise as employment rates of older people increase [see Kalwij, Kepteyn and deVos, ‘Retirement of Older workers and employment of the young’] and as the number of workers age 55 and over increases, overall employment and wage levels rise and unemployment falls [see, Munnel and Wu ‘Will delayed retirement by baby boomers lead to higher unemployment among younger workers’].
Historical analysis both in the UK and elsewhere supports this conclusion: For example, after World War II, the dramatic increase in labour force participation by women did not mean fewer jobs for men. Instead, it boosted economic growth as there were more two-earner families with higher disposable income, which created more new jobs as spending power in the economy increased.
UK 1970s’ ‘Job Release Scheme’ failed: In the 1970s, the UK Government tried to use ‘early retirement’ as a means of addressing youth employment. Its ‘Job Release Scheme’ aimed to encourage older people to leave work and ‘release’ jobs for the young, but the policy failed. Rising early retirement was accompanied by higher unemployment for younger people. Economists subsequently concluded that encouraging more older people to retire is not a way to increase employment prospects for young people over time. It can actually have the opposite effect.
France has historically tried reducing retirement ages as a policy tool to reduce youth unemployment: From 1971 to 1993 the Government encouraged early retirement, but this led to a fall in employment of both older and younger workers. In contrast, from 1993 to 2005 more older people stayed in work and youth employment rates increased.
There are other examples too: In Germany in the early 1970s, employment of older workers fell by 7 percentage points, but employment for younger workers decreased by 2 percentage points. However, in 1992 the German Government introduced new incentives for older workers to stay in work, leading to a fall in youth unemployment.
February 22, 2015 No Comments
13 January 2015
Latest Survey for Older Workers Champion shows a retirement revolution is well underway
Nearly 5 million people intend to keep working beyond age 65 as later retirement becomes the norm
Only 17% favour traditional retirement pattern as majority want to ease into retirement via part-time work first
Employers need to increase emphasis on later life training and flexible working
Millions of older people do not know that over 65s don’t pay national insurance
Retirement is changing as nearly 5million people plan to work beyond age 65: A nationwide Survey of over 50s has revealed some startling findings about attitudes to work and retirement. It is clear that a major re-evaluation of retirement is underway. When asked what their ideal working pattern would be between ages 60 and 65, only 15% of non-retired over 50s said they would want to stop working altogether. When asked their ideal working pattern from ages 65 to 70, around half would like to still be working, although preferably on a part-time, rather than full-time, basis. If the results are applied to the whole UK population, this suggests 4.8million people want to keep working and not be retired between ages 65 and 70. Currently, there are around 1.2 million over 65s still in work. Therefore, there is potential for a significant rise in later life work.
Traditional idea of retirement outdated as people want to work part-time before stopping altogether: Around half of people have increased their planned retirement age in recent years, as later life working is becoming an ever more important issue. Traditional ideas of a fixed, one-off, retirement date no longer seem to apply. Nearly two-thirds of over 50s do not believe that working full time and then stopping altogether is the best way to retire. More than a third (36%) of those already retired would advise people to work part-time before retiring altogether.
Employer attitudes need to change, more later life training and flexible work: To facilitate increased later life working for more of those who want it, employer attitudes and approaches to recruitment need to change, as well as more emphasis on later life training. In this regard, it is encouraging that almost half (47%) of all over 50s still economically active would be interested in taking a training course to improve their skills. If employers can help people combine training for new roles, or improving their skills, with flexible working as they get older, the Survey suggests there would be a major increase in wellbeing for our aging population, as well as better economic growth.
Nearly half of over-50s unaware that they won’t pay NI contributions if working past 65: One fascinating finding is that nearly half of over 50s were unaware that they can work beyond age 65 without having to pay National Insurance. This suggests scope for further education and information to help people understand the significant potential benefits of working longer if they wish to.
Support for idea of ‘gap-breaks’ in later life, then return to work refreshed: One in four over 50s said they would be interested in taking a few months off and then returning to work, as an alternative to retirement. Many people could benefit from a break, after years of full-time work, but after that break want to return to work again.
2.3million retirees miss work, wish they’d worked longer and miss the social interaction: More than one in five retirees say they wish they had worked longer (equivalent to 2.3million people nationwide). 38% say they miss the social interaction of work, indeed far more than the 27% who say they miss the income. Around one in five (18%) say they miss the feeling they are doing something useful. Over a quarter (27%) of those now retired wish they had worked longer, including those who had to retire due to illness or disability.
One in ten felt they had to retire but didn’t want to: Importantly, 11% of retirees say they did not really want to retire but felt they had to, or were expected to. If people feel they have to retire even if they don’t want to, we are wasting resources for the economy as a whole and individuals affected will be poorer than they need to be for the rest of their life. Conversely, enabling people who want to keep working in later life to do so, can mean higher lifetime income for millions of people, more output in the economy and higher spending power in the longer term, which will mean higher economic growth and better living standards for all of us.
Potential skills shortages if employers fail to act: There is an opportunity to refine retirement so that it can fit better with people’s lives. Employers will potentially face skills shortages in coming years, but allowing more flexibility for older workers, improving later life training and facilitating caring responsibilities if possible can all improve quality of life for older people while simultaneously benefitting business and the economy.
NOTES FOR EDITORS
Results based on YouGov national Survey of over 2000 retired and non-retired over 50s conducted in December 2014.
January 13, 2015 No Comments
Out of work over-50s suffer from poor tech skills, loss of confidence and ageism
Some JobCentres offer specific over50s training for IT, CVs and interviews
Volunteering is a great way into work – half of over-50s volunteers find employment
Having spent a day at the Streatham JobCentre, I thought you might be interested in some of my observations.
What’s it like?: The Streatham JobCentre is managed by a passionate woman called Denise who is clearly on top of her staff and encourages them to do their best for those who come through the JobCentre doors. There is plenty going on. Apart from the Advisers for JobSeekers Allowance (JSA) and Employment Support Allowance (ESA – which used to be called Incapacity Benefit) there are computers available for applicants to use, training sessions (some specifically for over-50s) and different seminars on various floors. I was told that over 90% of JSA claimants find work within 12 months, but older applicants are less likely to find work than the young.
Current situation: The local economy has been picking up in recent months, with far more jobs available. Initiatives to encourage more work experience and apprenticeships for the young have had a real impact, but those who have been unemployed for longest are in the older age categories. Some applicants have problems of drug and alcohol addiction (in fact the JobCentre staff had to help out someone who was drunk when I was there) as well as homelessness. Specific staff are dedicated to dealing with these issues which are so challenging when seeking employment.
Training provided by JobCentres: The JobCentre runs a range of different training courses and I sat in on one for the over-50s. Not all JobCentres have prioritised older jobseekers in this way, as they have discretion on how they spend their budgets. Older people tend to have specific needs, including requiring help with CV writing, interview techniques and new skills relevant to a modern workplace, including competency based application assessments or psychometric testing which older people are not familiar with. The course I attended offered practical tips to a group of 12 older jobseekers on how to network, how to build a personal ‘brand’, how to think about persuading an employer they will fit into the workforce, as well as being given a ‘skills healthcheck’ form, to help identify the particular skills they are good at.
Particular problems for over-50s: I was told that the biggest barriers for older workers are lack of up-to-date skills, lack of confidence and the ageist attitudes of employers who automatically assume older jobseekers will be less valuable to them than younger applicants. Improving technology and social media skills of over-50s is vital as so much recruitment is on-line. Many of those I met explained how being turned down for countless jobs leads to a loss of confidence, then to depression, which further reduces employment chances and they end up on ESA.
Promoting over-50s’ skills: All the advisers and training staff that I met commented on specific attributes they believe over 50s bring to an employer. These include loyalty, life experience, reliability, patience, organisational skills, time management and the ability to engage well with other people, including customers or even mentoring younger staff. It is important to change the way employers think about over 50s, appreciating that experience DOES matter.
Volunteering can be a good way into work – 50% of volunteers find a job:
Encouraging older jobseekers to take up volunteering has achieved good results. I met a firm which places volunteers locally, in roles including working in hospitals, food preparation or teaching. There are websites such as ‘Do It’ – www.do-it.org.uk or Community Service Volunteers, who run a specific programme for over 50s volunteers http://www.csv-rsvp.org.uk/site/home.htm or for volunteers with professional skills at www.reachskills.org.uk . Volunteers are effectively benefitting from work experience and can get references that ultimately lead to paid work. In fact, I was told that half of the unemployed who do volunteer work end up with a job, therefore a greater emphasis on encouraging volunteering could be beneficial.
New Enterprise Allowance: Many over-50s would like to work for themselves, especially if they find themselves discriminated against in the application process. The Government’s new Enterprise Allowance scheme, offering loans to set up a new enterprise, has the potential to help many over-50s find their own niche. Self-employment can suit older people well, allowing them to combine caring with working from home or at flexible hours perhaps.
Tailored help for over 50s: Over 50s may need special help to adapt to the modern working world. They may feel they don’t ‘belong’, or have outdated skills and need to learn new techniques. There is a skill gap in jobsearch for older applicants, who need to learn about online applications, social media, electronic CVs and even Video CVs. Further funding for training over-50s would be helpful.
Could Government subsidies for taking on younger workers be extended to older apprentices?: Employers taking on younger workers aged 16-24 are paid £2275 if the young person stays employed with them for over 6 months. There are no such subsidies for older workers, which means employers are biased against taking on the over 50s. Having had tremendous success in reducing youth unemployment, I hope we may see subsidised training, work placements or apprenticeships to help reduce long-term unemployment and re-skill older workers. From an employer perspective, training or recruiting an older person can improve their workforce stability, since older people are much less likely to move jobs than the young.
Zero hours contracts can be a barrier to employment: Many of the job vacancies that exist are in the care or hospitality industries, but they are often zero hours contracts. I think there needs to be careful consideration of the appropriateness of using zero hours contracts, especially in an industry like carework, in which staff continuity and reliability are so important. With an aging population, it is inevitable that demand for care services will rise sharply in coming years and I think the industry needs to evaluate its approach to staff reward and retention.
Conclusion: Streatham JobCentre is making progress in specifically helping older jobseekers, but the particular initiatives they have introduced need to be rolled out more broadly across the country. Volunteering can also help increase employment prospects. If we are to tackle the issue of recruiting older workers, more interventions will be required to ensure the barriers they face – lack of skills, loss of confidence and ageist attitudes, are overcome.
Case study – Martin:
I met Martin who left his previous job 6 years ago to train as an electrician. He did three years’ training, but then found he could not be a self-employed electrician without further qualifications, costing about £1000. He did not have the money for this and was very distressed to realise he could not do the job he wanted. He explained how he then decided he just wanted to work, and did not mind what work he did. He sent his CV to 20-30 employers a day for over 6 months and found no work. He tried Universal JobMatch but his CV did not pass the computer process-driven assessments used by many firms nowadays. CVs need to be tailored to keywords that computers search for to select candidates for interview. Eventually, he was offered a job as a careworker but that offer was withdrawn because the company could not contact his references in time – his previous firm may have changed hands or the person who knew him had moved on.
It was heart-rending to hear him describe how he would look out of the window each morning and see people going to work and felt inadequate. He said ‘when you’re not working it takes away from your humanity’. He ended up on ESA with depression but has now recovered and just found work. He was really excited to be starting a job at last. I suggested to the JSA advisers that when someone first signs on after redundancy that they should be asked if they can provide references immediately which can be placed on their file, so that they are readily accessible if an employer needs references quickly.
Case study – Kafa:
Kafa lost her husband a few years ago and had been looking after her 17 year old daughter, but now wanted to find work. She was on JSA for a time but couldn’t find any work, then her Work Adviser suggested self-employment. She received a £2500 loan and help with a business plan from the New Enterprise Allowance, bought some stock and set up a business selling hair pieces and jewellery at markets. She is really happy to be working and proudly showed me some of the items she sells.
December 7, 2014 10 Comments
7 October 2014
- Later retirement is inevitable and can boost personal lifetime incomes as well as the economy
- Retirement ages now lower than 1950s – but 6 months a year rise can’t last long, only a catch-up
- If sustained, retirement age would be 80 over next 30 years!
- But need a whole new concept of retirement – phase of part-time work, not suddenly stopping
DWP forecasts suggesting an increase in average retirement ages by 6 months a year can only be a short-term aim. As people are living longer, it is inevitable that they will need to work longer too, in order to achieve higher lifetime incomes. However, a rise of six months a year would mean, over the next 30 years, people would be retiring at age 80! I’m not sure that’s a realistic policy aim.
Ageing population with falling birth rates can’t sustain ‘early retirement’: The age at which people retire is already rising, from what will surely be seen in the years ahead as unreasonably young. The notion of ‘early retirement’ which was meant to represent economic progress is fundamentally flawed, especially with an ageing population and falling birth rate! The maths don’t stack up. In an ageing population, with falling birth rates, it is a recipe for economic decline.
Don’t aspire to retire’ in your 50s any more: Since the 1980s, an expectation had developed that people should aspire to retire in their 50s. This is simply not sensible or sustainable, especially as life expectancy has risen significantly, general health has improved and the physical demands of most types of work have eased. Even those in physically demanding jobs can retrain to do other work but often need to be supported to do so.
People are still retiring younger than in 1950s: In fact, increasing numbers of people are already choosing to work longer. In the 1950s, the average age of retirement for men was 67. At that time life expectancy was much lower than it is today, yet people are retiring earlier. That means their lifetime income is lower (especially as they often start work much later too) and they have less chance to save for a good later life income. It is clear that change is needed, but we have to manage that change carefully. The state pension age is already set to rise to 68 (you can calculate your state pension age here https://www.gov.uk/calculate-state-pension) .
Not everyone can keep working but good for those who can: Clearly, if you are not well, or your work requires heavy physical labour, or if you are exceedingly wealthy and choose not to work at all, that is your choice. Nobody should be forced to work longer if they do not wish to, but most people could benefit from rethinking retirement if they are in reasonably good health.
There is no official ‘retirement’ age any more – individual choice: The traditional idea of stopping work as soon as you reach a ‘pension age’, whether that be state pension age, or the age at which a private or company pension starts, is now out of date. There is no official ‘retirement’ age any more, even though many commentators refer to the state pension age as a ‘retirement age’. In fact, average retirement age for women is just over 63, which is beyond their state pension age although for men it is still a little under age 65. There can be more individual choice about when to stop working altogether, rather than being forced out by employers or assuming you must stop at pension age.
Redefine 21st Century retirement: The traditional idea of retirement meaning stopping work altogether needs to change – it is already happening, but there is far more that could be done to help it become a reality. The 21st century concept of retirement should be a phase of life with less work, rather than no work. This has the potential to improve millions of people’s lives. The longer you work, the higher your lifetime income will be, and the better your pension prospects too. By having a period of part-time work in later life, you can also enjoy a better work-life balance, have time for grandchildren, hobbies or holiday breaks and still be part of the social interaction of work.
Hidden boost to economic growth and individual or family incomes: By keeping the skills of older people in the labour force, national output and national income will be higher, which can boost economic growth. At the same time, individual and family incomes will be higher too, which means more spending both now and in future.
Retirement should be an ongoing process, not a one-off event: This needs changed attitudes among employers and individuals. The old idea of retirement as a one-off event, rather than an ongoing process over a period of years, should be consigned to history. Flexible later life work opportunities, which retain the skills and experience of older people as well as enabling them to earn more if they want to, can boost society as well as the economy.
Work has non-financial benefits too, improve national well-being: There is evidence that stopping work altogether when still healthy can damage health and many surveys also show that people value working for non-financial reasons too. Many enjoy the social interaction and feelings of worth that are associated with work and others find they enjoy self-employment rather than no work. Society’s attitude to later life working can change to benefit all of us. That is the real message we need. It’s not just about retiring later, or raising retirement ages, it’s about a whole new vision for retirement in the 21st century. The sooner we can make this happen, the better all our futures will be.
October 7, 2014 1 Comment
14th August 2014
- Unemployment has fallen far less for over 50s than for younger workers as ageism in workplace remains
- Under the coalition, unemployment for 16-49 year-olds has fallen 19%, but only 5% for over 50s
The latest ONS employment figures show that the UK unemployment rate has fallen far faster than previously expected and now stands at 6.4%, the lowest level since Q4 2008.
The figures also show that, under the Coalition Government, rising numbers of older people are remaining in work, with record employment levels for over 65s – a 291,000 increase since May 2010, up 36% over that period.
However, unemployment among those aged 50-64 has fallen much more slowly than for younger workers, suggesting that the over 50s are finding it far more difficult to get back into work and suggesting a need for further action to help re-employment for older workers. Employers and recruitment agencies are often focussed on hiring young people and overlook the older jobseekers. However, these groups have valuable experience and life-skills which can add value to many businesses, alongside younger workers. I hope to be able to identify any significant barriers and help more over 50s stay in or return to work if they wish to.
Q2 2014, latest data
Change since 2010 %
Change since 2010 number
Employees Age 16-49
Employees Age 50+
Employees age 50-64
Employees age 65+
Unemployed age 16 – 49
Unemployed age 50-64
- Over 50s have not been squeezing young people out of the job market. Rising numbers of older workers are also associated with rising numbers of younger workers.
- The number of over 50s in employment has been steadily rising. The total number of workers in the UK rose 5.8% between May 2010 and Q2 2014, with employment for the over 50s increasing faster than for younger workers
- The number of unemployed over 50s has not declined at a rate comparable with the number of younger unemployed. Unemployed people aged 16-49 fell 18.8%, while for those aged 50-64 it fell by only 5.3%.
- Economic activity for 50-64-year-olds has been gradually rising compared to economic activity for 18-24-year-olds, which has been relatively stable. In Q2 2014:
- 71.4% of 50-64-year-olds were economically active.
- 71.0% of 18-24-year-olds were economically active.
- 85.9% of 25-34-year-olds were economically active.
- 87.1% of 35-49-year-olds were economically active.
August 15, 2014 1 Comment
People will increasingly realise the benefits of redefining retirement
In the past, retirement was not an active decision – it just happened to you, dictated by your employer, a pension scheme or society: Traditional UK retirement was not an active choice, but an event that happened, dictated by outside forces rather than being a positive and considered decision. For example most people automatically stopped work at their pension age or were offered the chance to retire early with a good pension funded by their employer, or believed they must stop when reaching state pension age. Workers were not encouraged to make pro-active decisions about how or when to retire, unless they were in poor health.
Most people retiring now are still fit and healthy – what a waste of resources. Decisions about how, when – and even whether – to retire can increasingly become the choice of the individual. The old days of standard lifestyles that shoehorn everyone into the same mould are outdated. In the 21st Century, retirement no longer needs to be standardised. As people are living longer and are healthier, they do not need to leave the labour force just because they reach a ‘standard’ pension age. The skills and talents of the over 50s are too often wasted, due to outdated stereotypes of poor health and disability. Medical advances enable most of us to recover and live well with illnesses which would have disabled previous generations.
The recent pension changes make flexible working in later life easier: The UK has a tremendous opportunity to revolutionise its retirement and pensions system over the next few years as the restrictions and inflexibilities that have hampered UK pensions are being swept away. This can transform the way we think about retirement and pensions. This pensions revolution is an important part of the social revolution being driven by issues such as increased longevity, improved health in retirement and economic reality.
Pensions and retirement are out of step with people’s lives: As the proportion of people’s lives spent working has fallen so much, the failure to move retirement thinking to match developments in health and life expectancy has left many living on much lower incomes for longer than they need to. In the 1950s, when the current pension system was designed, the average worker would start working at age 15, work for about 50 years and then live for five or 10 years in retirement. That meant most people would be working for around two thirds of their lifespan (50 years out of 75). 10 years of retirement might follow their 50 years of work. In other words, each 1 year of retirement was funded by 5 years of work. Nowadays, people are working for perhaps 45 years and living in retirement for around 23 years, so each 1 year of retirement is funded by less than 2 years of work.
Record numbers already working past pension age: According to the Office for National Statistics, the number of pensioners in work nearly doubled from 753,000 (7.6% of pensioners) in 1993, to 1.4million (12% of pensioners) in 2011. Two thirds of older workers are working part-time, the majority with their previous employer. The longer people can stay economically active, the more chance they have to protect their spending power and increase their future income prospects. Those who work longer will not only have more money immediately, but they will also have more chance to build up savings. Setting money aside for future income needs, even after age 60, can help meet the challenges of longer periods in retirement.
Survey evidence confirms this is already happening: MetLife Survey results, from a nationwide Survey of 2000 adults highlight how attitudes are already changing:
- 71% of workers said they would consider working past state pension age, in order to achieve a higher retirement income
- Only 8% of workers said they would not be willing to work on, even if that meant they had to struggle financially
- Only around 20% of workers believe they are saving enough for retirement.
TABLE 1: Most people expect to be fit enough to work beyond their mid-60s.
Do you think you will be physically fit enough to work in your current job beyond your mid-60s?
|Age 60+||Age 50-59|
TABLE 2: The majority of people will consider working longer, particularly part-time, in order to achieve a much higher retirement income
Would you consider working longer to have much higher retirement income?
|Age 60+||Age 50-59|
|I would consider working full-time past state pension age to have much higher retirement income||24%||27%|
|I would consider working part-time past state pension age to have much higher retirement income||42%||42%|
TABLE 3: There are other reasons for staying on at work, apart from financial, such as giving a sense of purpose in life and social interaction.
Why would you want to keep working past state pension age?
|Age 60+||Age 50-59|
|I can’t afford to retire||32%||44%|
|I enjoy working and don’t feel ready to retire||47%||21%|
|Work gives me a sense of purpose in life||34%||29%|
|I would miss the social interaction of work||20%||31%|
|I want to save more for my retirement||20%||19%|
Working longer brings significant income and capital benefits. Every extra pay cheque means higher lifetime income, larger potential pension fund and pension savings have to last for fewer years. Staying at work can also keep people healthier – both physically and mentally.
Many people find retirement disappointing: Retiring while fit and healthy has been disappointing for many, who find they are bored or miss their work colleagues, do not have enough money and little structure to their lives. Some may have sufficient income to travel the world, participate in their hobbies and do voluntary work without any financial concerns, but they are a minority. The ideal is to work part-time for a while, before retiring altogether. This would give them a better work-life balance, help provide more income and enable a more gentle transition to full retirement. The retirement of the future will be one where people cut down work gradually and work part-time before finally stopping altogether.
July 15, 2014 3 Comments