Pension warning as retirements delayed ‘indefinitely’ in favour of ’19th-century norm’ | Personal Finance | Finance

A fall in final salary pensions, stretched state spending and longer life expectancy is predicted to completely transform retirement as we know it.

The “retirement cliff edge” is already a thing of the past, experts say, meaning that millions of Brits will live very different lives to their forebears when they reach pension age. The concept of retirement “while we are still capable of productive work” is an outdated idea that could be replaced by the “19th-century norm” of many needing to continue working well beyond age 65.

Employers have been called on to combat “ageism” in hiring practices and make adjustments for older workers to continue well past retirement age. Len Shackleton, Editorial and Research Fellow at the Institute of Economic Affairs, told Express.co.uk: “’Retirement’ in the sense we think about it – a withdrawal from the workforce while we are still capable of productive work – is very much a twentieth-century invention.”

This had been “facilitated by state pensions and final-salary private pensions which gave older people security for what was for most a fairly limited period of economic inactivity before they succumbed to mortality,” he said.

“Final salary pensions are disappearing, state spending is overstretched, people are living longer and there are fewer young workers to support them,” Mr Shackleton added. “If these trends continue, retirement is likely to be delayed more or less indefinitely, certainly for those who have not been employed in physically demanding jobs, and may revert to the 19th-century norm, when retirement was only for the infirm and those incapable any longer of sustained physical effort in factories and mines.”

The change in retirement trends is already well underway, said Dr Emily Andrews, Deputy Director for Work at the Centre for Ageing Better.

She told Express.co.uk that the way we leave work is “changing”, rather than “disappearing” – with the “‘retirement cliff edge’ very much a thing of the past.”

Stats show that people are already approaching pension age in entirely different circumstances to 20 years ago. Dr Andrews said: “There used to be a big spike in people retiring when they reached state pension age, but this has flattened considerably over the last decade. The number of people who keep working after 65 has risen by nearly a million since the millennium.

“One in nine people now keep working beyond their 65th birthday, compared to one in 20 in 2000.”

However, whether or not this applies to you will depend on existing wealth and the area of industry you are in.

Dr Andrews said: “The way people are able to navigate this transition into retirement is heavily dependent on how wealthy and healthy they are in middle age. Higher earners who are considering stopping work before retirement age are more likely to talk about wanting a better work/life balance.

“Lower earners on the other hand are more likely to refer to the challenges of their physical or mental health.”

She added that “high-quality, well-paid, flexible work like consultancy” are the kinds of job that “futurists have identified as options for older workers in the future. This kind of work won’t be an option for every older worker.”

However without an overall change in the way work is structured, this delayed or flexible retirement could cause problems for the economy and workers alike.

Andrew Scott, Professor of Economics at London Business School and author of The 100-Year Life, told Express.co.uk: “The problem is if governments keep raising the state pension age but don’t make it easier for older workers to keep working. Not all jobs can be done as you get older.

“Lots of firms follow ageist policies that mean they don’t hire older workers and often they are the first they get rid of. Skills also need to be updated and health maintained. We need to ensure not that people have to work for longer but that people can work for longer if they need to.”

There are also issues for those who leave work due to ill-health ending up with even less support that previously. Dr Andrews said: “People aged between 50-64-years-old who leave work due to ill-health have a median wealth that is 20 times lower than those who choose to retire. This is a major contributor to the fact that the highest rate of adult poverty is among 60-65-year-olds.

“These are people who are unable to access to work, and also don’t have the private means to support themselves.

“The poorer you are, the younger you are likely to find yourself in this position. Healthy life expectancy is just 53 in the most deprived parts of the country, compared to 71 in the least deprived.”

To combat this, she said, “we need much more high-quality, accessible, flexible work in our economy. That means more well-paid part-time jobs, more access to career progression in our 50s and 60s, and more access to adjustments in the workplace.

“So we need more employers to recognise the value of older workers, and actively work to remove age-bias from their recruitment processes.”

However, there are still ways to prepare for the future of retirement on an individual level.

David Nottingham, personal finance expert at NFU Mutual, advised saving for retirement from an early age to prepare. He told Express.co.uk: “As life expectancy has increased and traditional final salary pensions have been removed, many people have been forced to work later into their lives in order to be able to afford a retirement.

“It’s one of the reasons why the Government introduced auto-enrolment into workplace pensions back in 2012. Since then, the percentage of people with pensions has shot up, meaning more people are now saving for retirement.

“However, we know that many are not saving enough, and don’t have the guarantees of former final salary pensions. Therefore, some may have to, or choose to, supplement their income in later life in order to have the lifestyle they desire.

“Technological advancements that allow more people to work from home on an ad hoc basis may enable more people to do this.

“However, the majority of people still dream of a traditional retirement that allows them to stop full-time work, and the best way to ensure this is to start saving into a pension from an early age.”