Retirees are facing ‘real challenges’ as state pension age increases are pushing around 750,000 over 50s to get back into work.
Proposals to raise the state pension age earlier than expected have sparked concerns about potential financial struggles and unsustainability for retirees.
Around 750,000 people aged 50 to 64 are either actively seeking work or are inactive but are willing or would like to work, according to new Government figures.
The employment rate at age 65 has seen one of the largest increases over time when compared to other age groups, increasing from 26.9 per cent in 2014 to 40.4 per cent in 2024
This surge is largely attributed to increases in the state pension age that have sparked concerns that many have not saved enough.
According to SunLife, 28 per cent of over 50s have no pension savings apart from the state pension.
The current state pension falls short of the £14,400 annual income needed for a ‘minimum standard of living’, as defined by Retirement Living Standards
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Mark Screeton, CEO of SunLife, warned: “If the state pension age were to rise to 68 by the early 2030s rather than 2044-46 as currently planned, millions could be left struggling with no private pension savings to fall back on.”
The current state pension falls short of the £14,400 annual income needed for a “minimum standard of living”, as defined by Retirement Living Standards.
Screeton added that while some older people can work until 68, many face “real challenges” remaining in the workplace past 50. This could have knock-on effects for families relying on grandparents for childcare support.
The London School of Economics (LSE) has recommended raising the state pension age to 68 “as soon as possible”. This proposal aimed to address the challenges of an ageing population and increasing pension costs.
According to the LSE report, such a move could lead to £6.1 billion in savings for the Tresury. However, it acknowledges that this decision could cause “serious hardship” for thousands of elderly people.
The report said: “We already have direct evidence on the effect of raising the pension age upon the wellbeing of all those affected… The answer is an average loss of 0.12 points of wellbeing (out of 10) for a year.”
The LSE warned that remaining in employment until 68 could be a “real burden” for many, potentially impacting overall wellbeing and quality of life for older workers.
Older workers face significant challenges in the labour market, with ageism being a primary concern. Research among over-50s found that 55 per cent believe employers are less open to hiring older workers, compared to only 17 per cent who disagree.
The Government has pledged to tackle worklessness, focusing on supporting the 750,000 people aged 50-64 who are seeking work or willing to work.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown said: “The pandemic had a huge impact on over 50s workers, who exited the workplace in droves.
“Whether that be through redundancy or retirement, it not only left employers with an experience gap, it also left many older workers with a hole in their retirement planning.
“Leaving the workforce early not only means fewer contributions being paid into a pension, it’s also likely that people start drawing that pension earlier, which can put it under strain.
“This latest data shows some stabilisation, with the employment rate for those aged between 50-64 hitting 70.9 per cent. There’s every chance we will see this rate start to nudge upwards again in the coming years, especially as we see further increases in state pension age.”
For those eyeing a re-entry into the workforce after taking early retirement during the pandemic, Morrissey suggested some steps they can take to rebuild their pension.
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If they have already flexibly accessed their pension, they can continue to make contributions of up to £10,000 per year under the money purchase annual allowance to their pension or SIPP.
If they have yet to access their pension they can contribute up to £60,000 per year. Making the most of these allowances can help people make huge strides towards rebuilding their retirement resilience.
The current timeline for state pension age increases sees it rising to 67 between 2026 and 2028, with a further increase to 68 planned for 2044-2046. However, these timings could change.
The Government has delayed a decision on accelerating the rise to 68, promising another review within two years of the next parliament.
According to Fidelity International, those born on or after 5 April 1960 will be affected by the rise to 67, while those born on or after 5 April 1977 will face the increase to 68.
Any changes to the state pension age could be politically sensitive. The government must balance fiscal pressures with potential public backlash