As pension ages rise, what are our prospects for working longer?

In March of this year the UK government began its long-term review of state pension ages, with a number of commentators predicting large increases in the age of eligibility. David Lain, author of Reconstructing Retirement, sets the context for this review by considering wider changes to retirement policy.

It is commonly said that retirement is changing, with people increasingly expecting to do some form of paid work after ‘retirement’ age.

Sara Rix from AARP, for example, reports perceptions from the US that Baby Boomers will ‘reinvent and/or revolutionise retirement… they will… combine work and leisure in new and more rewarding ways’.

Increasing employment

In reality, however, it is arguably governments that most want us to ‘rethink’ retirement. In my view UK and US governments are actually seeking to reconstruct retirement, by increasing employment at age 65+ and dissolving the notion fixed retirement ages. They are doing this in two ways.

First, UK and US governments are increasing the financial need to be working at 65-plus. State pension ages are rising and the safety net of benefits available to those exited from work early is being eroded.

“state pension ages are rising to 68 and beyond…”

In the UK, for example, state pension ages are rising to 68 and beyond, and early access to Pension Credit is disappearing. This is in stark contrast to the former UK Pensions Minister Ros Altmann’s earlier claim that ‘rethinking retirement’ was ‘not about forcing people to work on’.

Second, governments have increased opportunities to work beyond age 65 (see here). The UK has followed the US in abolishing mandatory retirement ages, so employers are no longer able to retire off people at fixed ages. Pension reforms have likewise made it easier for people to work whilst taking a pension, further blurring the divide between work and retirement in the UK and US.

Prospects?

This raises the question of what people’s prospects for employment beyond age 65 really are. Three factors suggest that employment increases among this age-group will be insufficient to respond fully to this changing policy context.

First, we need to consider the pathways to working at age 65+. Governments often assume that extending working lives is as simple as getting people to stay in their career jobs longer. However, working might also require individuals to start new jobs in older age if, for example, they are made redundant or need to change jobs or reduce hours.

“..fewer Americans manage to work ‘in retirement’ than expect to…”

Research suggests that Americans are more likely than their UK counterparts to start new jobs in older age, but fewer Americans nevertheless manage to work ‘in retirement’ than expect to. Once out of work, older Americans find it harder to get back into employment than younger people. In this sense, opportunities to work at this age in both countries are likely to much less certain than governments assume.

Second, for many individuals there are questions about their capability to be working at this age. Low levels of health and education, alongside caring responsibilities, constrain employment for significant numbers of individuals (for some evidence see here).

Third, many older individuals are constrained in their ability to make realistic financial choices about work. Employment at 65-plus is more common amongst the richest than the poorest (see, here again). This is not surprising when we consider inequalities in education, health and the types of jobs people do.

There is considerable evidence of financially motivated employment in the US, and more recent cohorts in the UK appear to anticipate working longer for financial reasons. However, as noted above, fewer people work beyond typical retirement age than expect to, according to the wider US literature. This, therefore, presents real problems in the context of increased pressures to work.

Financial security

Given the challenges outlived above, we need policies that support employment and retirement choices in older age. Greater financial security for older people is required, including the continued option of receiving state pension income at age 65. Policy also needs to do more to help enable people to remain in work until age 65 (and beyond), through additional educational/training provision and support for caring.

Finally, for those wishing to work longer there is a need for a strengthening of UK age discrimination legislation.

Unless governments make significant investments in the areas outlined above, we all face uncertain prospects for retirement.

A longer presentation of the findings from David Lain’s book, Reconstructing Retirement, can be seen below:

See also the website for this book.

#retirement #Pensions #PensionReform

Reconstructing retirement: Work and welfare in the UK and USA by David Lain can be purchased here from the Policy Press website for special 20% discounted price £56.00.

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