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Flexible retirement and pensions options needed

Catering for those wanting to, and those not able to, work into later life is a complex challenge

More flexible and creative pensions and savings options are needed to encourage working into later life, according to experts at The Economist's Ageing Societies conference.

In separate talks, both director of the World Health Organisation’s Ageing and Life Course John Beard, and former UK minister for state and pensions Ros Altmann warned against raising the state retirement age. They both explored the complexity of the challenge of an ageing population given that while many will be able and want to work into later life than previous generations, others will not.

This latter group who need to retire earlier for health reasons are typically those most in need of state financial assistance, pointed out Beard. “There’s an assumption we’re living longer and healthier,” he said, explaining that evidence of this is limited. “If true the idea of getting people to stay in the workforce for longer is reasonable. But if not it’s less reasonable.”

Beard cited stats that two-thirds of people in the UK currently have “trouble with function” by the age of 65. “Raising the retirement age to 67 will impact much more on these people than everyone else,” he said.

“We have to have a way of ensuring everyone is financially secure,” he added. “I don’t think even rich countries have achieved that at the moment.”

“I’m not in favour of raising the state retirement age because it doesn’t recognise the differences across society,” agreed Altmann. “Just raising the state pension age doesn’t acknowledge the fact we have a wide disparity across the country, depending on occupation and background.”

At the same time policymakers must factor in ever increasing appetite among some to carry on working later, Altmann said, with the pensions system reshaped to reflect this. “All the way through the last 40 years retirement has been painted as some sort of golden dream; we have this phrase ‘early retirement',” she said. “Actually most people don’t mind the idea of working longer.

“If you speak to people who have stopped work you often find they wish they’d been able to stay on part time,” she added, qualifying though that “the vast majority of people aren’t taking advantage of the opportunity of working later in life”, and “it is an opportunity. There’s a whole new phase of life waiting to be grasped.”

CEO of PensionDanmark, Torben Möger Pederson, said he believes that in the “future we’ll see much more flexible retirement” and that pensions provision will reflect this. “So instead of working five days a week people will work four days and take a small amount of their pension out to cover the reduction of hours,” he said.

Employers as well as government have a crucial role in supporting working into later life, speakers agreed. Altmann, among others, spoke of the huge business benefits of harnessing older employees’ experience, ability to understand the needs of older customers, and willingness to work for the same organisation for more than a few years.

She also described the benefits to the economy. “If everybody worked one year longer that would add 1% to GDP; that’s massive,” she said, adding though that older workforces still face significant, often unconscious, discrimination in work and at interview.

She said that such bias means those who do work into later life are typically the “well-educated or people starting their own businesses, rather than this being a wider opportunity". This further exacerbates the demographic issue of those being able to work into later life typically not being those most in need of greater financial assistance in retirement, she said.

Beard added the role of individuals and the media in breaking down age and life stage stereotypes. “These assumptions aren’t just made by policymakers but are internalised by each of us as we go,” he said.

“I think we have to go right back to square one and think about what it is we want to achieve,” he said. “We have these certain assumptions that you study in your early twenties and retire at 65; it’s just absurd. We need to think much more flexibly about what we can do.”