ONS warns early retirement could negatively affect individual finances and wider economy

The Office for National Statistics (ONS) has warned that the exit of workers aged between 50 and 65 from the workforce could negatively impact both individuals’ finances and the wider economy.

The organisation’s Living longer: impact of working from home on older workers study estimated that if the employment rate of people in the age group matched that of those aged 35 to 49 years, it would add more than 5 per cent to UK gross domestic product (GDP), equating to around £88bn.

The research pointed towards continued flexible working as a way to keep older workers in employment, noting that previous research from June and July 2020 had found that those who were working entirely from home were more likely to say they were planning to retire later (11 per cent) compared with those who were still having to deal with a commute (5 per cent).

It also noted that its prior research had found that older workers aged 50 to 69 who were working from home thought it improved their work life balance and well-being, while people with long-term conditions were also found to be less likely to plan for early retirement if they were working from home.

Accordingly, the proportion of older workers who planned to work from home after the pandemic was 22 per cent, which ONS said was above pre-pandemic levels.

The report also identified strong differences between when people stopped working along gender lines, noting that 17.9 per cent of 50 year old women were economically inactive, compared with 9.6 per cent of men the same age.

Meanwhile, at age 64, 58.6 per cent of women were economically inactive, compared to 44.9 per cent of men.

Hargreaves Lansdown senior pensions and retirement analyst, Helen Morrissey, said: “Anything that enables people to stay in work for longer and benefit from increased income and pension contributions is welcome. Leaving the workforce early can have an enormous effect on someone’s financial resilience in retirement as well as their physical and mental wellbeing.

“This data shows that the shift to working from home has had a positive effect on older workers in terms of their health and work-life balance. Not having to commute to an office every day frees up time and can also mean you are less exposed to illness. It can mean people are able to work longer than they otherwise would have.”

Fidelity International investment director, Maike Currie, pointed out that not all older workers preferred working from home, explaining that Fidelity research had found that over a fifth (21 per cent) of people in their 50s thought the pandemic had “a negative impact on their career”.

She continued: “There is a financial domino effect - with a fifth (21 per cent) of over-55s experiencing a decrease in their personal income over a 12-month period due to the pandemic, with a real concern that changes to working patterns or income levels could mean retirement looks very different to the one people had imagined pre-pandemic.”

AJ Bell head of retirement policy, Tom Selby, added: “While in some cases stopping work early will be a voluntary decision – for example as a result of early retirement – in other situations it will be less voluntary, such as ill-health.

“Worryingly, although perhaps not surprisingly, people who work in low-paying or physically intensive sectors are six times more likely to stop working before state pension age because of ill-health than those working in other professions.

“What’s more, women are more likely to stop working early than men, potentially further perpetuating the gap in pensions between the sexes. Stopping working in your 50s – when in theory your earning power and ability to save should be at its highest – could also have a significant impact people’s retirement outcomes.”

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