Caring Responsibilities Forcing Over 50s Out of Work
Ill health, caring responsibilities and redundancy are cutting working lives short and putting retirement incomes at risk.
Just over half of people in their 50s and early 60s who left their last job did so for involuntary reasons, according to new analysis from the International Longevity Centre UK (ILC).
The ILC paper, Retirement transitions, warns that pensions policy still works on the basis that people can keep working and saving until State Pension Age. Yet many leave work years earlier, losing earnings and pension contributions and potentially using up savings intended for retirement.
The paper, using the latest ONS survey data, part of ILC’s work with the Standard Life Centre for the Future of Retirement, finds that:
• A quarter of 55–64-year-olds with private pensions they have not yet started taking have less than £30,000 in those pensions. And around one in five of this age group have no private pension wealth at all.
• Women aged 55–64 with private pension wealth hold a median of £105,000 – estimated at nearly £90,000 below men’s.
• Around 28% of 55–64-year-olds rent, leaving them with ongoing housing costs to meet in retirement.
• The typical saver is first dipping into their defined contribution (DC) pension at 60 – years before State Pension Age.
ILC is calling on the Pensions Commission to focus on the years between leaving work and receiving the State Pension as a core part of what’s missing from existing work and pensions policy. Someone’s consumption needs in retirement will look very different after considering health, employment, caring responsibilities and housing costs together.
Ben Franklin, ILC Deputy Chief Executive, commented, “Pensions policy must confront the reality that many do not have a full work history and then retire at State Pension Age before receiving their pension – state and private combined. Millions are instead leaving the labour market early, increasingly with defined contribution pension pots that are being accessed well before pensionable age.
“Women are facing particularly acute challenges – first through time out to raise children, then through caring for a partner or relatives in later life. Lower earnings and lost contributions over their lifetime leave them with far less to retire on.
“Pensions adequacy must focus on what people will need beyond basic replacement rates – taking on board the complexities of balancing work, care, ill health and increasingly renting. And decumulation pathways need to be flexible and adaptable enough to reflect the different realities people and households are facing on the verge of retirement.”
Catherine Foot, Director of the Standard Life Centre for the Future of Retirement, said: “The assumption that people work steadily until state pension age before drawing on their retirement income is far from reality. The path to retirement is less straightforward today compared to previous generations, with people reaching later life in different work situations, financial positions and with different responsibilities. These are often shaped by factors beyond their control, such as ill health, caring responsibilities, redundancy and other life events, which can force people out of work earlier than planned and leave them with fewer years to earn and save. This can create significant income gaps.
“As the Pensions Commission considers ways to improve retirement adequacy, we need to ensure the years before state pension age are not overlooked. Support should be targeted at those who fall out of employment early, and we need to help people continue working for as long as they want or need to where they are able.”
