More than 23m employees are expected to work beyond the age of 65 with many admitting they need to continue to earn a wage due to insufficient pension savings, according to research.
Canada Life’s survey of a of 1,002 full and part-time employees, carried out in April 2019, found nearly three quarters (71 per cent) of UK employees, equivalent to 23m people, were set to work past 65 years old, up from 61 per cent in 2005.
Of these, two in five (37 per cent) believed they would reach 75 before they retire, according to research published today (May 29).
A third of those who intended to work past 65 admitted they had to continue to earn a wage because their pension savings were insufficient, rising to 39 per cent among 45-54 year olds who are approaching retirement age.
A quarter of employees acknowledged they could not rely on the state pension and would have to work for longer to boost their pension pot, up from a fifth (21 per cent) last year.
Paul McGlone, president of the Society of Pension Professionals, said: "As each generation lives longer it’s inevitable that they will need to work longer to fund their retirement.
"Combine that with the move from final salary schemes to less generous defined contribution schemes, individuals will need to work even longer in order to save enough.
"The figures in the Canada Life survey are encouraging in that they show that individuals are recognising that reality and starting to plan for it."
Top five factors why people are planning to work beyond 65
My pension will not be sufficient, so I need to continue earning a wage | 32 per cent |
I enjoy my job and would like to work for as long as possible | 30 per cent |
I can no longer rely on a state pension/state benefits | 25 per cent |
I have saved for my retirement, but the cost of living is so high I will still need a wage | 21 per cent |
I get other benefits from work, for example, social interaction | 21 per cent |
Respondents could select more than one answer
Canada Life also found 71 per cent of those who expect to work past 65 said the rising cost of living played a role.
According to the British Retail Consortium’s Shop Price Index, food prices increased at a faster pace for more than five years as a result of last year’s extreme weather and an increase in global import costs.
Despite a fall in inflation over the past year, another two in three (63 per cent) said rising inflation eating into the value of their savings was an influential factor, while 62 per cent said the same of poor returns on their savings.
But 30 per cent of people said they wanted to work past 65 as they enjoyed their job, while 17 per cent would continue to work to receive employee benefits.
In particular, income protection (17 per cent) and life insurance (16 per cent) were two employee benefits which were highly valued for those working past 65, while 13 per cent also stated preference for critical illness cover.
Paul Avis, marketing director of Canada Life Group Insurance, said: "Income protection and critical illness cover should be at the top of employers’ lists to appeal to an ageing workforce. They are increasingly popular with employees planning to work beyond 65, protecting as they do against ill health and conditions which become increasingly likely with age.
"With proper planning on employers’ parts, these benefits can be provided with no medical questions for the vast majority of their workforce."
Gregg McClymont, director of policy at The People’s Pension, said: "While many people want to keep working past retirement age and its critical for the economy that they do, for health reasons some people cannot keep working, especially as state pension age rises. This makes starting to save as early and as much as possible even more crucial.
"The introduction of auto-enrolment has helped 10m people to start saving for their future, but there are still millions of people missing out, as they’re not eligible for the scheme.
"The government must provide a timescale to deliver its pledge to lower the eligible age from 22 to 18, make contributions count from the first pound of their pay packet, and ensure lower earners who would benefit from the employer contribution aren’t excluded from the scheme.
"Cutting the required earnings for an auto-enrolment pension to the primary National Insurance threshold would bring in half a million new pension savers, and abolishing what’s called the net-pay anomaly would also ensure that 1.75m low earners would receive the tax relief through auto-enrolment that they are entitled to but currently miss out on."
The net-pay anomaly means that those with incomes below the income tax personal allowance, which is currently £12,500, miss out on tax relief when they are auto-enrolled into a pension.
According to analysis from Now Pensions, low earners will miss out on up to £78m in tax relief in 2019/20.
amy.austin@ft.com
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