Longer life expectancy and the rising cost of supporting the ageing population may push the state pension age up to 69 by 2042, a study has revealed, leading to calls for an urgent focus on attraction and retention of older workers.
The report, Decades of Change, predicted that the cost of a “comfortable retirement” would increase by 150 per cent in 2050, and that by 2056 the state pension age would rise to 70 years old.
The data, compiled by consultants the Centre of Future Studies and Evelyn Partners, also revealed that a third (30 per cent) of 30 to 40-year-olds hadn’t started saving for retirement or any form of pension.
A Department for Work and Pensions (DWP) spokesperson said the government was required by law to regularly review the state pension age, and confirmed it had launched the second state pension age review.
“The review will consider whether the rules around state pension age are appropriate, based on a wide range of evidence including two independent reports,” the spokesperson said, adding it is too early to speculate on the outcome of the review, but that the results will be published by 7 May 2023.
However, Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, highlighted there were already plans in place to raise the state pension age to 68 by 2046, as we are continuing to live longer. “It’s a reasonable assumption that it’s only a matter of time before the state pension age reaches 69,” explained Coles, adding that while it may not happen overnight, raising state pension ages would be a logistical minefield for workforce planning.
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“Not everyone is going to reach these ages in good health, raising the question of whether current sick pay and sick leave covers their needs. Employers may need to consider income protection cover for those who cannot work but cannot afford to retire either.”
But, HR consultant Gemma Bullivant questioned how the predicted retirement age would impact all pillars of the HR strategy, as older workers will likely want a bespoke or different working pattern.
“Some older workers who perhaps have other pension provisions in place and/or no mortgage to cover are likely to be considering a glide path to retirement, and be attracted to a more flexible working pattern and reduced hours,” said Bullivant.
She added that urgent work was needed on how to attract and retain older workers, and that the decline of them in the workforce was “significantly contributing to the overall talent shortage and squeeze on pay, and will require a complete rethink of what this sector of the working population wants, needs and can offer”.
However, Stuart Lewis, chief executive of Rest Less, said the biggest problem with continuing to raise the UKs state pension age was the “great inequality” we see in ageing in the UK. “Continuing to blanketly increase the UKs state pension age ignores these staggering inequalities and risks exacerbating serious health risks for many who simply don’t have the ability to keep working,” said Lewis.
Additionally, Steve Herbert, wellbeing and benefits director for Partners&, questioned why the state pension age would rise, as life expectancy has “become static”. He said: “There’s no real justification for the increase, so this is really about finding a way to save a significant amount of money for the economy and keep people in work to help solve the cost-of-living crisis we are currently facing.”
Meanwhile, a survey by Royal London found that workers now rely on their employer to help shape their retirement savings approach, as a quarter (23 per cent) considered their employer a source of guidance for their pension.
Additionally, more than half (54 per cent) say they would be comfortable having a conversation about money with the organisation they work for.