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New age thinking

New age thinking

Members of Britain’s ageing workforce increasingly want to carry on beyond the State Pension age – and businesses are taking advantage.

 

There is a greater number of older people working today than ever. The latest government figures show that some 9.4 million people aged 50 and over are now in work¹, making up 30% of the workforce (8.2 million between 50 and 64, plus 1.2 million over 65²).

 

The over-65s are generally still working for one of two reasons: either they don’t want to retire, or they can’t afford to. In a recent study of over-50s in the workplace³, Aviva discovered that more than one in three now expect to retire at a later date than they had expected when they were 40. On average, they have pushed back their expected retirement age by eight years.

 

For nearly half of them (46%), it is because they haven’t saved enough into their pension. But 21% said they would work longer because they still had a lot to offer, while 20% pointed to the enjoyment that work provides.

 

One reason for extended careers is that we are living longer and 65 is not the great age it might have once seemed. Government policy is also intent on prolonging working lives. The default retirement age has been abolished, so that staff can’t be forcibly ejected the moment they reach 65, while State Pension ages are being pushed back.

 

In a special report for the government called A New Vision for Older Workers⁴, Dr Ros Altmann (now Baroness Altmann) outlined some of the pluses of retaining older staff. She pointed to research which suggests that the majority of older workers are just as productive as younger staff, at least until the age of 70⁵. Companies that employ them hold a body of experience that just isn’t available elsewhere.

 

Keeping on older employees also reduces skill shortages and, because they are less likely to leave, lowers staff turnover. Older customers appreciate dealing with their peers, and customer satisfaction drives higher profits. Across the board, the presence of older employees tends to improve staff morale.

 

Helping hand

 

DIY chain B&Q has a long record of employing older people. In a 1989 pilot project, its Macclesfield store was staffed by people over 50 for six months. Profits increased by 18%, while staff turnover fell by 80%⁶. It scrapped its mandatory retirement age a few years later.

 

“Having a diverse workforce works for our customers,” says Fraser Longden, People Director at B&Q. “The older workers employed in our stores have greater life experience and a willingness to work, which means they can pass on their knowledge and skills to customers and younger members of staff⁷.”

 

Other UK companies that now make a virtue out of employing older staff include Barclays, BG (formerly British Gas), JD Wetherspoon and National Express.

 

If this works for companies, it works for people too. Some choose to put off claiming the State Pension, since it means larger pension payments later on; others continue to work while drawing their pension. Either way, citizens/employees no longer have to make National Insurance contributions after 65.

 

Research commissioned for the Altmann report came up with similar results to the Aviva study. Many liked the idea of retiring gradually rather than abruptly, while more than one in five retirees said they wished they had worked longer.

 

 

Golden age

 

What about the economy? It is here that the case for older workers becomes overwhelming. PwC has created a Golden Age Index, which tracks how well developed countries are doing in harnessing the potential of older workers. The UK is currently 19th out of 34, with Sweden, the EU’s best performer, in third place.⁸

 

If the UK could match Sweden, PwC estimates that the UK’s annual GDP could be boosted by £100 million. And this wouldn’t be blocking the progress of younger workers, but adding to total employment. Demographics now make keeping people at work an economic necessity, rather than merely an attractive option, and Baroness Altmann urges companies to “retain, retrain and recruit” many more older workers. As her report notes, over the next few years there will be 3.7 million more people aged between 50 and State Pension age, but 700,000 fewer people aged 16 to 49.⁹

 

“This net shortfall of workers cannot be filled by immigration of 200,000 a year,” says the report. “With our ageing population, businesses urgently need to recognise the demographic inevitability. Either more over-50s will work longer, or we face declining economic growth.”

 

To receive a complimentary guide covering Wealth Management, Retirement Planning or Inheritance Tax Planning, produced by St. James’s Place Wealth Management, contact Roy Duns of St. James’s Place Wealth Management on 0191 385 1530 or email roy.duns@sjpp.co.uk

 

 

Representing only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the Group’s wealth management products and services, more details of which are set out on the Group’s website www.sjp.co.uk/products.

 

1https://www.gov.uk, August 2015

 

2http://www.ons.gov.uk, May 2016

 

3http://www.aviva.com, May 2016

 

4, 5, 9https://www.gov.uk, May 2016

 

6hrmagazine.co.uk

 

7https://womensbusinesscouncil.dcms.gov.uk, May 2016

 

8PwC Golden Age Index, June 2015

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