Plans on hold | Soaring cost of living slams the brakes on millions of workers' retirement dreams

Soaring cost of living slams the brakes on millions of workers' retirement dreams

New research has found that 2.5 million pre-retirees will have to delay their retirement as a result of the cost-of-living crisis.

Among those planning to delay,1.7 million expect to have to keep working indefinitely in either part-time (19%) or full-time (9%) roles, according to the findings of Legal & General Retail

Pre-retirees who plan to delay their retirement say they will need to push it back by almost three years on average, with nearly two thirds (64%) unable to afford the loss of income whilst costs are so high.

The cost-of-living crisis is another in a series of setbacks that have seen pre-retirees reconsider their retirement plans. The findings suggest that 46% of workers aged 55+ have had their plans impacted by external factors such as the pandemic, Brexit and rising living costs.

Over one in seven pre-retirees are also presently looking for additional work in order to boost their income, and one in 10 are concerned about the stability of their job in light of the current economic conditions.

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However, while a need for income remains a priority for many who plan to delay, a desire to stay in the workplace is also driving many people. Other reasons for pushing back retirement include people simply enjoying their jobs (26%). A further one in four say they don’t feel ‘old’ enough to retire yet, while a fifth worry they will be bored if they retire.

Lorna Shah, Managing Director of Retail Retirement, Legal & General Retail, said: “Retirement can be tricky to navigate even without the backdrop of rising living costs, so it’s understandable that those approaching retirement aren’t sure what they want to do next. While many choose to retire later because they enjoy their work, there are millions of people who’re making this decision based on necessity, rather than personal choice.

“But retirement isn’t a once and done decision. Before concluding their retirement needs to be delayed or forgotten indefinitely, I’d urge people to think about the role different products and assets can play and make use of the free, impartial support available offered by the likes of MoneyHelper and Citizens Advice Bureau. It’s crucial to have a strong understanding of the options available before making any long-term decisions.”

While many delay their retirement plans, early retirees are urged to go back to work

Data from the Office of National Statistics shows that approximately 1million people in the UK have left work since the start of the pandemic in March 2020, with retirement the most popular reason given by people aged between 50-70.

And many within this cohort have been urged to return to the workforce, regardless of their own financial situation, to support the UK economy.

The boss of John Lewis, Dame Sharon White, said in a recent interview that these early retirees could be enticed back into the workplace with flexible working options, in a bid to plug the huge talent crisis facing the country.

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Speaking to BBC Radio 4’s Today programme, Dame Sharon discussed the exodus that has seen around a million people leave the working population since the pandemic began, contributing to an increase in inflation and wage growth.

Fewer employees in work means businesses are facing pressure to raise salaries, which in turn is pushing up prices. It is also having major long-term implications for businesses struggling to fill jobs, Dame Sharon added.

“One area that I think has not had enough attention is what has happened in the jobs market over the last 18 months,” she told BBC Radio 4.

“Regardless of what is happening coming out of COVID, if the labour market is that tight, if we continue to have far fewer people in work – or looking for work – you have inevitably got more inflation and wage inflation.”

Dame Sharon is not alone in her thinking about the importance of getting retired staff back into the talent pool. Recent research found that many retired workers have already started heading back into the jobs market, as the cost-of-living crisis forces many to reconsider how far they can stretch their savings.

Rest Less, a digital community and advocate for people in their 50s, 60s and beyond, published research which found that economic activity levels amongst people aged over 50 are at their highest levels since the pandemic.

Rest Less analysed the latest labour market data from the Office of National Statistics and found that economic activity levels – a measure of people in work or looking for work – amongst people aged over 50 are now at 10,974,000 – their highest level since January to March 2020, just before the pandemic devastated the jobs market.

Official labour market data appears to be showing the first signs of a return to the long-term trend of more economically active people aged over 50 – a decades long trend which was reversed by the pandemic*

What this means for HR

It’s a sad state of affairs when those who have either already taken retirement, or had plans to do so in the near future, must consider returning to or remaining in employment to make ends meet. It’s also deeply unfortunate that many who have recently gambled on the opportunity of early retirement have had their dreams curtailed by circumstances beyond their control.

And as many of these older workers head back into the talent pool, there are issues that HR should be aware of when considering recruiting from this new cohort.

Mitchell Roberts, Employment Law Specialist at law firm Taylor Wessing, said: "Employers considering applications from older workers looking to re-join the workforce need to make sure that those candidates are treated in the same way as others applying for the same job. It will be particularly important for employers to avoid stereotyping older workers and to ensure decisions are based on objective merit.

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"Care should also be taken where an employer considers rejecting a candidate based on speed of work and use of technology as these are typically linked to allegations of age discrimination. Employers should ensure that they look to use age-neutral criteria when assessing the best candidate for the job and keep in mind that providing the required training and affording the appropriate time to get to grips with the role will be expected."

However, anyone from this cohort applying for new jobs should not be viewed with any sense of pity. Although they are re-entering the talent pool because of financial circumstances, they will bring a wealth of experience and skills to the workplace.

If handled correctly, the return of older workers could be a win for employers – an opportunity to solve talent problems, and benefit from years of experience and accumulated wisdom at the same time.

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