Urgent action is needed to ensure millions of over 50s do not end up with inadequate retirement savings due to unemployment and the rising state pension age, the Centre for Ageing Better has said.
The Centre for Ageing Better’s new report looking at the “unemployment trap” experienced by over 50s highlights that without urgent action to encourage and permit more individuals aged 50 to 64 into work, they are likely to suffer financially in retirement.
With over 3.3 million people in this age group not in work, most are no longer in work by the time they reach the state pension age, the report noted.
“The millions of over 50s already out of work will have to wait longer until they can receive their state pension – for those aged 56 or below, at least two years longer – at a time when they are unable to secure an income for themselves,” the Centre for Ageing Better reported.
The report was based on work with people aged over 50 in Greater Manchester and was prepared in conjunction with the Centre for Local Economic Strategies, in partnership with the Learning & Work Institute.
The Centre for Ageing Better has suggested that the national government, local authorities and employers should take greater action to encourage the recruitment and maintenance of over 50s workers by offering greater flexibilities in the workplace and in the benefits system.
Hargreaves Lansdown head of policy Tom McPhail commented: “The unfortunate reality is the majority of people don’t get to choose when they stop work, all too often retirement is something that happens to them whether they want it or not. This can be hugely damaging for individuals, for society and for the economy. Addressing this challenge requires commitment from central and local government, from employers and from individuals themselves. Making sure you have built up adequate retirement savings can mean that if the unexpected does happen, at least you have the financial resources to deal with the consequences.”
Hargreaves Lansdown also added that having to terminate employment at 60, for example, can have a dramatic effect on a person’s pension. The firm explained that a 50 year old today with £100,000 in pension savings, earning £40,000 a year and paying in eight per cent could boost their private pension income by £2,700 a year. If they delayed retirement from age 60 until 67, this would take their total retirement income up from £5,600 to £8,320 a year.
PLSA director of external affairs Graham Vidler added: “This research makes for alarming reading. With people spending longer in education and living longer, we simply cannot afford to compress working lives like this. It will be hard, if not impossible, for them to save for a longer retirement – bearing in mind that those in their 50s now may live well into their 90s.
“The Ageing Better report also highlights the fact that we need to build understanding among other age groups that they cannot necessarily rely on working until state pension age – or beyond – to build their pension pots. Many people see their 50s and 60s as a time to focus on building up their retirement saving; being unable to work due to poor health, caring responsibilities or lack of employment opportunities will hit their retirement plans hard.”