Work longer to boost your state pension
It's not so long since retirement was a one-off event – it 'happened' on a particular day, often with a presentation, kind words and a bit of a do, and then you went home and started a very different life of leisure - and often boredom and disorientation too – as a 'retiree'.
But the UK's ageing population, together with steadily increasing life expectancy and crippling falls in pension values over the past five years or so, have put paid to that scenario for a growing number of people.
According to the Prudential's Class of 13 research project, which tracks the plans and expectations of people retiring this year, expected retirement incomes are at a six-year low, down 18% on the average for 2008. Clearly, retirement and a comfortable pension for life are no longer being handed to us on a plate - and that means older people are having to revise their retirement expectations quite radically.
The government has started to increase the state pension age, to try to manage the growing costs of an ageing population: it's set to rise to 68 by 2046. However, this can only make an impact if at the same time older people support themselves by remaining in work for longer.
That's clearly beginning to happen. Research by Cass Business school for the insurer Unum reveals the number of older workers in today's workforce is up by 46% compared with the 1980s. Meanwhile, the latest (May 2013) figures from the office for national statistics show almost a million people over 65 are still in work - up a substantial 10% on a year ago.
And the trend towards an ageing workforce is set to increase: the Unum research forecasts that by 2020, a third of the UK's working population will be aged over 50.
In line with that, there seems to be a growing acceptance among people approaching retirement age that working life won't necessarily end at 65.
Almost six out of 10 respondents in the Prudential study say they'd consider working past the state pension age, and of those 40% would opt for full-time work. They are motivated primarily by financial need, but also by the desire to keep fit and active, socialise and live a purposeful life.
However, this upward trend in older worker numbers doesn't tell the whole story. The International Longevity Centre-UK has published a paper looking at the issue of lengthening working lives, and makes the point that many people stop working well before state pension age – and not necessarily because they choose to. Ill health may play a part, and if they lose their job it can be harder to get a new one.
Potential barriers to employment for older people include a lack of up-to-date technology skills, chronic health issues, elderly parents to care for, continuing age discrimination, inflexible employment policies, and – by no means least – the engrained belief among older people that they have a 'right to retire' at a certain age, regardless of massive demographic and economic changes.
Help or hindrance
Nor have companies historically been supportive. The traditional view has been that older employees tend to be a hindrance – preventing the young getting on, out of touch with technology and stuck in their ways. For example, only 8% of businesses currently invest in training for the over-60s, according to research by the e-learning company, Skillsoft.
But the fact is that companies can benefit greatly by retaining or recruiting older people, in terms of broad experience, knowledge and customer appeal.
The pivotal thing for employers is to make sure they don't lose someone adding value, just because they've reached a certain age," explains Dianah Worman, diversity adviser at the HR professional association CIPD. "Older employees know their customers or clients, how the business runs, what's gone wrong in the past and how to fix it, and new people can't just hit the ground running."
A change in thinking
So what is being done to support and encourage an older workforce? Not much at government level, so far. The Lords Committee on public service and demographic change has called for employers and the government to work together to help older people remain in the workforce, and the government has suggested that older workers to go back to university, but as Kevin Young, general manager of Skillsoft, points out, much more is needed.
"While enabling the older generation to remain in the workplace for longer is a vital step in addressing the issue of an ageing population, it will only work if accompanied by a change in thinking by organisations. This includes reworking HR policies and practices to meet the needs of this growing number of older workers in UK businesses," he stresses.
Flexibility is the biggest issue for most people, according to Denise Keating, chief executive officer of the Employers Network for Equality & Inclusion, which includes around 17% of the UK workforce in its membership. "They may want to work fewer hours, or prefer a less physically demanding job, or want to 'downscale' their responsibilities. Companies need to accept that people want different things out of their work as they get older."
Employers also need to be prepared to make 'reasonable adjustments' to help employees deal with the inevitable physical challenges of getting older, just as they would for disabled employees. For example, says Keating, they could provide bigger screens for people with eyesight problems, or buy special workstations for those with hip or back trouble.
Worman adds that a more inclusive approach to training is also important. "If older people don't want to attend, employers need to ask why not. They may be embarrassed or feel they won't be able to keep up. Companies can do something about that," she says.
Ultimately, this is a situation that isn't going to go away. Companies need to be creative in encouraging older people to continue working in their mid-60s and beyond, and we all need to embrace the idea that working life won't necessarily grind to a total halt once you reach 65.
Companies feeling the benefit of older employees
The company has introduced flexible pension and retirement packages, so it can continue to employ older workers on a more flexible basis. Staff can draw part of their pension to top up their income and continue to pay into their plan in preparation for full retirement.
Ernst & Young
One of several City firms to actively promote the idea of ‘boomeranging', whereby employees retire and then return to the firm on a consultancy basis. It also maintains alumni networks to help recruit older workers.
Research by Lancaster University Management School showed that customer satisfaction levels were on average 20% higher in McDonalds outlets with at least one member of staff aged 60-plus. Not only did they connect better with customers and show willing to ‘go the extra mile', but they also acted as mentors, helping younger colleagues.
Faced with an ageing workforce (a third will be over 50 by 2015), BMW has introduced a health management programme and apprenticeship schemes for older workers. It also overhauled a production line to reflect the needs of older workers – boosting productivity by 7% in a year.
In exchange for any lump sum – usually your pension fund – an annuity is “bought” from an insurance company and provides an income for life. When you die, the income stops. Annuity rates fluctuate daily and depend on your sex (although from 21 December 2012 insurers will no longer be able to use gender as a factor when calculating annuities), age, health and a number of other factors, so you have to pick the right one and, once bought, its terms cannot be altered, so seek financial advice.