Retirement crisis looms as ‘dramatic shifts’ see Britons working until 71 with no pension savings

People are starting and stopping work later in life, remaining in education for longer than previous generations and delaying retirement. However, this shift comes with significant pension risks, as many workers aged 60-65 have no private pension savings.

Patrick Thomson, head of research analysis and policy at Phoenix Insights, Phoenix Group’s longevity think tank said: “There have been dramatic shifts in how we retire in recent decades.

“Thirty years ago, women typically retired in their mid-50s and men in their early 60s. Today, those gender differences have all but disappeared, with both men and women retiring on average at 64.”

However he explained state pension age increases have usually been the primary driver behind this, but it’s not just about changes to pension policy anymore.

Both men and women now retire on average at age 64, marking a significant change from three decades ago, according to new analysis from Phoenix Insights, Phoenix Group’s longevity think tank.

Those currently out of work face different reality, expecting to retire at 71 – five years later than those who are employed.

The findings highlight a growing divide between workers and non-workers in their retirement prospects, with current workers expecting to retire at 66 on average.

Thomson continued: “Women also now make up a much bigger part of the workforce and greater workplace flexibility means more people now transition to retirement gradually, staying in work for longer on reduced hours.

“There has also been a trend towards self-employment among the over-50s. This can give people more choice and control over their working life, but may also be due to being unable to find work with an employer.”

One in five workers aged 60-64 are now self-employed and this rises to one in three for workers over 65, offering greater flexibility and control over working life.

However, this shift comes with significant pension risks, as nearly two-thirds (64 per cent) of self-employed workers aged 60-65 have no private pension savings.

Three decades ago, women typically retired at age 56 and men at 61, creating two distinct retirement peaks driven by gender differences.

This five-year gap mirrored the difference between male and female state pension age eligibility, which stood at 65 and 60 respectively.

The latest analysis shows women’s retirement age has increased by seven years over the past 30 years, while men’s has risen by three years.

Those with the highest household incomes of over £100,000 expect to retire earliest at 62, compared to age 69 for those earning under £30,000.

The state pension age has also been a key driver of later retirement, with changes seeing women’s qualifying age rise from 60 to 65 between 2010 and 2018.

It increased again to 66 for both men and women between 2018 and 2020, with further rises to 67 planned in the coming years.

Nearly half (45 per cent) of non-retirees expect to work beyond their state pension age, according to Phoenix Insights polling.

The state pension age traditionally acts as a retirement signal, particularly for those struggling to work longer or lacking private pension savings. However, this signal may be weakening for future retirees who anticipate needing to remain in work longer.

Flexible working arrangements have also become increasingly popular among older workers, emerging as a key factor in extended careers. One-third of over-50s now work part-time, reflecting this shift towards more adaptable working patterns.

Home-working among this age group has seen a dramatic increase post-pandemic, more than doubling from 10 per cent to 22.4 per cent between 2020 and 2023.

“Flexible work has been a game-changer for supporting over-50s to continue to work, earn and save later in life,” Thomson said, while warning that high rates of economic inactivity among this group remain a concern.

Many over-50s still face challenges re-entering the workforce after leaving due to caring responsibilities or ill health.