The employment rate for people aged 50 and over has grown rapidly over the last three decades, driven by an ageing population and savers failing to set aside enough money from their retirement.
For those aged 50 to 64, employment has grown by 14.2% from 1984 to 2015, according to new statistics released by the Department for Work & Pension. Meanwhile, for people aged 65 and over the employment rate has doubled over the past 30 years, from 4.9 to 10.2%.
The largest increase in employment rates was for women aged 60-64 where the rate more than doubled as it grew from 17.7 to 40.7%, boosted by increases in the state pension age, as well the fact that people living longer.
Another trend that has contributed to the growing number of older people in employment is the fact that savers have not saved enough to retire comfortably, particularly those with defined contribution (DC) pensions.
For some, work is the only option
Steven Baxter, head of longevity innovation and research at Hymans Robertson, says: “Our analysis of over half a million DC savers shows that three quarters will not have enough to live off when they stop working.
“For these people the only option is to work for longer. This could be by staying longer in existing jobs or moving to part-time and alternative employment as part of a transition to retirement.”
He points out that many of those approaching retirement may have the added pressures of elderly parents requiring care at one end, and children who need financial support at the other.
There is evidence of more flexible working options becoming available to those of retirement age, says Baxter, but he adds that “as a nation we'll need to do more to support those who wish to stay in employment for longer - be that for financial or other reasons”.
A recent survey by Old Mutual Wealth (OMW) retirement found that out of UK adults aged 50-75 around 30 per cent expect a job to help fund their future retirement income needs.
Benefits of working longer
Adrian Walker, a retirement planning expert at OMW, comments: “The recent employment statistics confirm a trend we'd been seeing that people are increasingly working longer. Part of their motivation is to fund their retirement income.”
By 2051 the old-age dependency ratio - the number of people in work relative to those in retirement - is expected to hit 2.9. Back in 1971, the ratio was as high as 3.6. This means that British people of working age will be paying a state pension bill far bigger than it is today, Walker says.
“Working longer has several other benefits for the individual, including reducing cases of mental illness and shrinking later life care costs.
“The Institute of Economic Affairs suggests that retirement increases the chances of suffering from clinical depression by around 40%, and of having at least one diagnosed physical illness by 60%,” he says.
Additionally, a new pool of workers could also fill the potential talent gap that may result from the future outcomes of the Brexit vote, says Walker.
Given the current political uncertainty surrounding the UK's place in the EU, the government should be bolstering its economy with the resources it already has.
This story was originally written for our sister magazine, Money Observer.