By Dr Kathy Hartley, Interim Subject Head, Human Resource Management Group
Recent headlines highlighting the increase in state pension age to 67 years, phased in over the next couple of years, had been expected. However, with further increases already under review, questions remain about the longer-term impact for workers and employers.
Those approaching retirement have likely been making decisions and adjustments as to exactly when to retire from paid work over the last few years. A 2017 review suggested a rise to 68 years in 2037-2039, while a 2022 review recommended a rise to 68 in 2041-2043. Quite what the government will choose to do is currently unclear.
In one sense, some workers have been choosing to remain in employment beyond what was once the norm for some time now, particularly since the default retirement age of 65 was removed back in 2011. For some, this is clearly beneficial financially, even if it involves reduced hours or, in some cases, less strenuous forms of work, especially in the context of rising living costs. Others remain in roles they find intrinsically interesting, feel motivated and healthy, and see no reason to stop what they have been doing. In a small number of cases, this can create challenges for employers, particularly when an employee’s health and/or performance becomes an issue.
‘Mid-life’ career transitions, including new starts over the age of 60, are far more common than was once the case. Some older workers decide to take on new challenges, perhaps working part-time at what they have done for years while combining this with other forms of work that may have interested them for some time, effectively creating a new or ‘portfolio career’ later in life.
For those with a ‘healthier’ occupational pension pot, there will undoubtedly be more choice as to when to formally cease paid work. One thing that many of us need, however, is greater ‘financial literacy’, or simply to pay closer attention to the state of our pension pot and what kind of future it is likely to provide. Employers and governments both have a role to play here. Some free government pension advice does exist (Money Helper, The Pension Service), and governments have been pressing – particularly larger organisations in recent years – to pay more attention to employees’ financial wellbeing. Younger people themselves have mooted that budgeting and the practical aspects of finance might actually be useful subjects to cover in school.
For more of us to have genuine choice over whether to stay in the workplace for longer, financial understanding and planning will be key, as will employer support in relation to flexible working and adjustments. Such support has risen in recent years, driven by various changes in employment law, and the need for this – along with open conversations about employees’ longer-term aspirations – is unlikely to lessen.
Whether younger generations will face longer careers, and how much longer, is difficult to judge. Existing research and employer feedback suggest different orientations across generations, with younger people less inclined to rush into paid employment than previous generations. Pressure on entry-level jobs, combined with expectations of working into one’s later years (70 and beyond) may help to explain some of this hesitancy.