The employment rate of people between 50 and 64 has fallen from 72.1 per cent to 71.2 per cent in 2021, according to the Department for Work and Pensions (DWP), igniting concerns over damage to retirement prospects.

The effects of the Covid-19 pandemic were cited as the likely driver behind the decrease, with Interactive Investor arguing that the data also indicated that while home working may help some older workers stay in the labour market, it was not an option for all.

The DWP figures showed that self-employment levels among older workers also dropped, falling from 18.5 per cent in 2020 to 17.1 per cent in 2021.

Interactive Investor pointed out that employment levels among the over-50s have been rising since the 1990s.

Interactive Investor head of pensions and savings, Becky O’Connor, said: “Working in later life, particularly past state pension entitlement age, is more often likely to be a necessity rather than a choice. Although many people do like working if they are fit, well and have no other caring responsibilities, others would much rather be easing back and focusing on enjoying their later years.

“Covid has meant that many older workers who need income from employment have less money coming in. As well as affecting their current living standards, this will also affect their ability to continue to put money aside for eventual retirement.”

She noted that reversal of the Covid-related trend depended on employers re-hiring older workers, but pointed out that this might not be viable as it “can be difficult to successfully apply for certain jobs once you reach a certain age”.

O’’Connor continued: “If older people who have lost jobs are now using some of their pensions instead, this could spell trouble further down the line, when they are trying to make their pot last.

"This makes it even more vital that people have access to information and products that helps them both build their pension through working life and preserve their pension through retirement.

“This data showing longer working lives comes after the introduction of the Health and Social Care levy – which will also hit older workers. So not only do more people have to work for longer, they have to pay tax for longer, too.”

Meanwhile, Hargreaves Lansdown senior pensions and retirement analyst, Helen Morrissey, said working beyond the age of 65 had become “a necessity for many people if they want to enjoy a comfortable retirement”, adding that “very few people can afford to retire at the age of 50 and the age at which people can access their state pension is increasing”.

She continued: “Early exit from the labour market can have a huge impact on people’s financial resilience as they miss out on what is for many people a sweet spot where their earnings and disposable income are high and they can afford to make real inroads into their retirement planning.”

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