A record 1.5m over-65s are still in the workforce as the cost of living crisis puts retirement out of reach for many.
© PA/Kirsty O’Connor
Photo dated 03/04/16 of an elderly woman counting loose change. – PA/Kirsty O’Connor
More than one in ten people aged 65 or over were either in work or job hunting in the three months to April, new analysis by Rest Less of Office for National Statistics data shows.
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12pc of over-65s are still economically active, which is the highest level since records began in 1992.
The number of older Brits in the job market has risen by a fifth over the past five years, from 1.2m in 2018 to nearly 1.5m.
Unemployment levels have also risen by the same amount, as more over-65s seek but struggle to find work later in life.
Stuart Lewis, chief executive of Rest Less, which provides a digital forum for over 50s, said the figures partially reflected greater longevity, recent increases to the state pension age and the “desire to stay active and purposeful”.
However, Mr Lewis said: “Sadly, for some, it has also been accelerated to some extent by the current cost of living crisis.”
The UK has the highest rate of inflation in the G7 at 8.7pc, which is eroding living standards and pushing up borrowing costs.
Age UK warned last week that soaring inflation was “driving a coach and horses” through many people’s retirement plans and forcing some back into work.
As well as growing discontent among people of retirement age today, the Government faces a looming crisis in funding the state pension in future as people live longer and the working age population shrinks.
Proposals to date have suggested ratcheting up the retirement age to extend the length of time people pay taxes.
However, the Government will be warned it cannot keep raising the state pension age without pushing millions more workers into financial hardship or poverty.
Phoenix Insights, a think tank set up by the FTSE 100-listed company behind Standard Life, will say this week that official recommendations to link pension spending to the size of the economy means a 30 year-old today faces waiting until they are 74 before they can access state support.
In a report published on Tuesday, Phoenix will describe the proposals as unrealistic given the increasing instances of ill health as people age.
“There is most concern for those unable to remain in work and without sufficient resources to draw upon,” the report will say. “This group faces a benefits system that pays significantly less to those of working-age than those above state pension age.”
Phoenix will add that the Government faces “serious questions of intergenerational fairness and affordability as large numbers reach retirement in the coming decades.”
Research by the think-tank found many people had lost faith that any state support would be available to them by the time they retire.
The think-tank recommends a fifth of the money raised through future increases in the state pension age – or around £1bn a year – should be used to support vulnerable groups as well as those with a terminal illness who have paid a minimum level of national insurance contributions.
Those on low incomes or with a work-limiting health condition should be allowed access to the state pension a year early, it will add.
John Cridland, a former boss of the Confederation of British Industry (CBI), recommended in 2017 that the state pension age should increase to 68 by 2037. The change would impact almost seven million people working today.
Mel Stride, the Work and Pensions Secretary, postponed any decision on the state pension age until after the next election because of a fall in life expectancy triggered by the pandemic.
Phoenix believes the current plans should be permanently shelved because they do not reflect the health outcomes of the British public.
It will also recommend a “co-ordinated Sustainable Work Fund” is created to support employers and workers in the decade or so before retirement age to ensure they have the skills and health to keep working.
Patrick Thomson, head of research and policy at Phoenix Insights, said: “The state pension is the biggest single part of the social security system and has been the foundation of many people’s retirement over the last 75 years.
“However, looking ahead, it is facing serious questions of intergenerational fairness and affordability as large numbers reach retirement in the coming decades.
“Increasing the state pension age will mitigate some of the costs, but delaying access to state pension payments alongside the under-saving crisis creates a perfect storm for worsening poverty for those unable to remain in work until their late 60s.
“Policy interventions are needed in the years approaching state pension age so that more people aren’t dragged into financial hardship. But we also need to radically change the way that we think about work, making it more sustainable and fulfilling, with better opportunities to upskill, change careers and save for a good retirement.”
In a separate report published today, Aviva warned that 3.4 million 32- to 40-year-olds face retiring with as little as £225,000 by 2050 given current low levels of saving.