The state pension age has already risen from age 65 to 66 and further increases are on the horizon. By 2028, the state pension age will be 67, and it will rise again to 68 by 2046.
The hike to 66 appears to have had a significant impact on Britons’ ability to retire, with 55,000 more 65-year-olds in work, according to a report from the Institute for Fiscal Studies (IFS).
In the most deprived areas of the country, the effects were the most obvious, with the employment rate for women at age 65 increasing by 13 percent and 10 percent for men.
This was much higher than in the wealthiest areas of the UK, where the rise was four and five percent for women and men respectively.
With Britons no longer able to claim the state pension at 65 years old, they must rely on their own savings if they wish to retire before the age of 66.
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Becky O’Connor, Head of Pensions and Savings at interactive investor, believes that although many people continue to work into their old age because they enjoy it, there are others who simply cannot afford to retire.
She said: “Many people work for longer because they have to, not because they want to.
“If someone is healthy, well, and enjoys work, there are many benefits to continuing to do so, even if they have enough money to retire.
“But we do need to stop sugar-coating working into old age, take off the rose-tinted glasses, and confront the reality that the reason many continue to work is that they do not have sufficient, or maybe even any, private pension provision.”
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She continued: “Old ladies are presumably not filling up supermarket shelves because it gives them a sense of identity or keeps their mind challenged.
“I am sure many could think of other things they would prefer to be doing, but the truth is, they don’t have a choice.”
Andrew Tully, technical director at Canada Life, also commented on the IFS report findings, and explained some of the factors which may go into a decision to continue working.
He said: “The pandemic has had a dramatic impact on people’s retirement plans, with many exiting the workforce early following a revaluation of their plans and what they want to achieve in later life.
“For others, it is all about remaining in work looking to bridge the gap to their state pension age.
“There are a variety of reasons why people choose to work beyond traditional retirement ages, or indeed opt to not class themselves as retired.
“For some the social side of work would be missed, for others, the financial impact of not working is the key driver.”
Mr Tully believes the key to giving people more freedom to retire when they wish is to do more to support them in establishing a healthy pension pot in advance.
He continued: “As an industry we need to find ways of encouraging better engagement in long-term financial planning as a way to ensure that people feel confident in building sufficient savings for retirement.
“Auto-enrolment has been an unqualified success but we need to think about how we encourage greater levels of saving, perhaps by introducing auto-escalation at the point of pay reviews.
“For example, the employee receives a pay rise and automatically a percentage of that goes into the pension as additional savings.
“Consideration should also be given to extending auto enrolment to workers who don’t currently get picked up, including low earners and the self-employed as soon as possible. This would help level up the pensions playing field.”
