Early retirement is becoming a ‘fantasy’ for millions of workers, experts warn.
Higher life expectancy, the demise of final salary pensions and a rising state pension age mean the number of people retiring before 65 has fallen by a quarter in just seven years.
Pensions experts are predicting ‘the death of early retirement’ as all but a lucky few work into their 70s. In a bleak assessment, savings giant Aviva said that by 2035, almost no-one will give up work before the age of 65.
The Department for Work and Pensions has said hundreds of thousands of over-50s may have to go back to work
Tom Selby, a senior analyst at investments firm A J Bell, said last night: ‘This will be a brutal reality check. The idea of stopping work early is fast becoming a fantasy.’ The warnings came as:
- A senior official at the Department for Work and Pensions (DWP) said hundreds of thousands of over-50s may need to return to work because they will not have enough to live off in retirement;
- Employment minister Alok Sharma revealed the Government wants employees to be offered ‘mid-life MOTs’ to tell them how long they have to stay in work to have a comfortable retirement;
- MPs were told of plans for a ‘National Retraining Scheme’ to ensure older workers adapt their skills.
Office for National Statistics figures yesterday showed the number of under-65s in retirement has fallen by 433,000 in the past seven years, from a peak of nearly 1.6 million in 2011 to under 1.2 million today.
The report also showed a record 10.1 million over-50s are in work, including 1.2 million who are over 65. There were fewer than 700,000 over-65s in work ten years ago and just 434,000 in 1998.
Former pensions minister Sir Steve Webb blamed the demise of final salary pension schemes that offered workers a decent income in retirement.
He said: ‘Final salary pensions were very often the means that someone could take income enough to live on at 55, but fewer and fewer people are now reaching that age with such a pension.’
It is also thought some parents are unable to retire because they are still supporting their families – particularly children who need the help of the ‘Bank of Mum and Dad’ to get on the housing ladder.
The state pension age for women is rising to match men at 65 and will increase to 66 for everyone by 2020 before rising further. Government actuaries believe it will reach 70 in the 2050s and 71 in the 2060s.
MPs in Westminster were told of a national retraining plan to keep elderly workers’ skills topped up
Alistair McQueen, head of savings and retirement at Aviva, said that by 2035 there may be almost no one giving up work before the age of 65. That would mean nearly everyone born after 1970 will work beyond their 65th birthday.
Duncan Gilchrist, deputy director of ‘fuller working lives’ at the DWP, said there was a need to raise the ‘financial awareness’ of people in middle age.
He said the Government wanted to ‘work at getting people fit enough to work for longer’ – and to allow people to work more flexibly as they get older.
The National Retraining Scheme would be a ‘mechanism to try to make sure that of our skills base the people who don’t have current relevant skills are able to go to sectors where there current relevant skills’, he added.
Mr Sharma said the DWP will bring out more details on proposed mid-life MOTs later in the year.