Why Raise the Retirement Age At All?

(June 13, 2012)  —  The number of people working past the state retirement age in the United Kingdom has doubled in the last 20 years and will continue to outstrip the growth in the rest of the working population, research has shown.

Some 1.4 million people over the state retirement age – 65 for men and upwards from 60 for women – had either remained in or taken new employment in the UK in 2011, according to the Office for National Statistics (ONS). This figure is double the 753,000 people in the same situation in 1993.

The population over the state pension age in the UK grew from 9.9 million to 11.7 million over the same period, the ONS said – an increase of 18.2%.

This means the group is also making up a larger part of the overall labour market, which has not kept pace with the rising level of older people staying in employment. Last year they made up 12% of the UK’s working population, up from 7.6% in 1993.

The ONS said numbers had been relatively stable until 2000 but rose quickly thereafter to a peak of 1.45 million in 2010. Research from Primetime Retirement, a pension solution provider, said this number could reach 2 million by 2025.

Tom McPhail, Head of Pensions Research at financial advisory firm Hargreaves Lansdown, said: “It is an inevitable consequence of more and more people arriving in their 60s with inadequate retirement savings. This trend will accelerate over the next few years; it presents a significant challenge to individuals and employers who will need to find ways to accommodate more flexible working patterns and later retirement ages.”

The vast majority of this group – 62.5% – have worked for the same employer for 10 years or over, according to the ONS, suggesting people have decided to put off retirement due to fears of not being able to afford as comfortable a lifestyle as they might like.

Darren Philp, Policy Director at the National Association of Pension Funds, said: “Our rapidly changing demographic is hitting home. Having more older people in the workforce will increasingly become the norm. Many are choosing to ease into their retirement for social and financial reasons, and part-time work is a popular option. Employers also value the skills and experience of older staff.

 Philip added that there could be greater issues ahead: “The problem comes when people want to retire but end up stuck at work because they cannot afford to leave. With half the workforce not saving into a pension, this is going to become a painful reality for millions. It is vital that we get more people planning and saving for their old age, and that they start as early as possible.”

Across Europe governments have been responding to better longevity expectations by raising retirement ages – albeit in a delayed reaction to life expectancy increases – in an attempt to curb spending on retirement provision and burdens on employers providing pensions.

One exception to this has been in France where newly elected President Francois Hollande has set in motion a plan to reverse the raising of the retirement age from 60 to 62 enacted by his predecessor for some sectors of the population.