A retirement revolution is needed in the Western world. As life expectancy has risen inexorably during the past few decades, while birth rates fell, the ageing population has begun to pose major challenges to all economies.
For many years, the focus of attention has been on encouraging people to save more and increase their pensions, in order to ensure an aging population can be supported sustainably. Of course, saving more is important, but it is not enough on its own. Many people have large debts to repay, and the amount of saving required to provide a decent income level for ever-lengthening periods of retirement is too high to be realistic for most people.
So, working longer also has a vital part to play as part of the solutions to the pensions crisis.
The scale of the UK’s demographic challenge is so large that immigration cannot realistically replace the numbers of over-50s who might leave work and, in any event, post-Brexit Britain is likely to see downward pressure on these numbers in coming years. By 2022, there will be 700,000 fewer people aged 16 to 49 in the UK – but 3.7m more people aged between 50 and state pension age. There will simply not be enough young people to support ever-rising numbers of economically inactive pensioners.
Fortunately, many of those reaching their 50s and 60s do not feel ‘old’ and want to keep working – both to earn more but also for the social interaction and stimulation of work itself. Recent surveys have found that around half of workers over age 50 want to see themselves employed through ages 65 and 70. This could mean an extra 4.8million people working past age 65 in future years.
If older people keep working longer, the burden of support falling on younger generations should reduce significantly, and the productive potential of the economy will rise as spending power increases. In this respect, overcoming barriers to later life working can boost prospects for both old and young, for businesses and the economy as a whole.
Research by the National Institute for Economic and Social Research shows, as an example, that if all over-50s worked an extra three years, this could add up to 3.25% to real GDP per year by 2033, which is equivalent to an extra £55 billion a year in 2014 GDP terms. Even if everyone worked one year longer it could add one per cent to growth – helping to improve living standards for all.
The over 50s are a major untapped resource – a hidden talent pool that can boost output. It is important to stress that this does not mean taking jobs away from young people either. Academic and historical evidence shows that, far from damaging job prospects, keeping more older people in work means rising employment and wages for younger people.
It is also important to stress that this is not about forcing people who are too ill or too old to work, to stay on. But it is important to recognise that many who want to work longer face significant ageism in the workplace, with older workers facing barriers to promotion, to training opportunities, to re-skilling and to returning to work after time out, whether due to redundancy or caring.
Flexibility is essential here. Most older workers want to work part-time, so that retirement becomes a process of cutting working hours, rather than a one-off event stopping altogether. Although the Government has abolished the default retirement age and extended the right for everyone to request flexible working, much more is needed. Older workers may need new skills and opportunities for retraining and career reviews as well as less rigid working hours and structures, to support other pursuits.
Older women in particular face problems, as the sharp rise in women’s state pension age without sufficient notice has left many women facing income shortfalls they could not have foreseen. Women now reaching their 50s and 60s have been especially disadvantaged in terms of lifetime income and pensions, and face particular workplace barriers. They are more likely than their male colleagues to be family carers, which can have an impact on how they manage work and on the ability to earn reasonable incomes.
Many businesses have already recognised the advantages of keeping on or taking on older workers, as well as young recruits. There is an economic rationale: retaining older workers can help overcome skill shortages, can reduce recruitment costs, improve customer satisfaction and an age-diverse workforce can enhance staff loyalty.
Employers should consider the 3’R’s – ‘R’etain older workers to keep these skilled workers; ‘R’etrain older workers to ensure their skills are updated and ‘R’ecruit older workers by eliminating age discrimination in the hiring process.
So more later life working is a win-win – individuals can improve their financial, physical and mental health if they keep working, rather than retiring too young. Businesses can benefit from having experienced staff to meet the demands of an aging customer base and the economy benefits from more spending power in years to come. There are many benefits to individuals, business, society and the wider economy of encouraging and facilitating later life working. Let’s rethink retirement for the 21st Century.