Record 1.5 million over-65s still working as cost-of-living crisis dashed their retirement dreams

File photo dated 04/03/16 of an elderly woman counting loose change. – PA/Kirsty O'Connor

A record 1.5 million over-65s are still in the workforce as the cost-of-living crisis puts retirement beyond reach for many.

More than one in 10 people aged 65 or older were either employed or looking for a job in the three months to April, a new analysis by Rest Less of Office for National Statistics shows.

12 percent of those over 65 are still employed, the highest since records began in 1992.

The number of older Britons in the labor market has risen by a fifth over the past five years, from 1.2 million in 2018 to almost 1.5 million.

The unemployment rate has also risen by the same amount as more over-65s seek work later in life but struggle to find work.

Stuart Lewis, chief executive of Rest Less, which provides a digital forum for over-50s, said the figures partly reflected longer life expectancy, the recent increase in the statutory retirement age and a “desire to stay active and purposeful”.

However, Mr Lewis said: “Regrettably for some it has also been accelerated to some extent by the current cost of living crisis.”

The UK has the highest inflation rate in the G7 at 8.7 percent, driving down living standards and driving up borrowing costs.

Age UK warned last week that rising inflation was taking “horse and carriage” thwarts many people's retirement plans and forcing some to go back to work.

Alongside growing dissatisfaction among people of retirement age, the government faces a looming crisis in funding state pensions going forward as people live longer and the working-age population shrinks.

Previous proposals suggest raising the retirement age in order to lengthen the tax payment period.

But the government is being warned that it cannot raise the state retirement age any further without plunging millions more workers into financial hardship or poverty.

Phoenix Insights, a think tank founded by the FTSE 100-listed company behind Standard Life, will say this week that official recommendations linking pension spending to the size of the economy mean a 30-year-old is counting on it today has to wait until the age of 74 they are entitled to state support.

In a report released on Tuesday, Phoenix called the proposals unrealistic given the rising incidence of the disease with age.

“The greatest concern is for those who are unable to stay in work and lack adequate resources,” the report said. “This group faces a benefit system that pays people of working age significantly less than people over the statutory retirement age.”

Phoenix will add that the government faces “serious intergenerational equity and affordability issues as many people retire in the coming decades.”

Research by the think tank found that many people had lost faith that government support would be available until they retired.

The think tank recommends that a fifth of the money raised from future increases in the statutory retirement age – around £1billion a year – be used to support vulnerable groups, as well as people with a terminal illness who have been paying a minimum State Pension insurance contribution .

Those on low incomes or with work-limiting health conditions should be able to access the state pension one year early, it said.

John Cridland, a former head of the Confederation of British Industry (CBI), recommended in 2017 that the state pension age be raised to 68 by 2037. The change would affect almost seven million people who work today.

Mel Stride, the Secretary of State for Work and Pensions, has postponed any decision on the state retirement age until after the next election because life expectancy has fallen due to the pandemic.

Phoenix believes the current plans should be permanently shelved as they do not reflect the health outcomes of the UK public.

It also recommends setting up a “coordinated fund for sustainable work” to support employers and workers around ten years before retirement age and ensure they have the skills and health to continue working.

Patrick Thomson, director of research and policy at Phoenix Insights, said: “The state pension is the largest part of the Social Security system and has been the foundation of many people's retirements over the past 75 years.

“However, looking ahead, the country faces serious intergenerational equity and affordability issues as many people retire in the coming decades.

“Raising the statutory retirement age will mitigate some of the costs, but the delay in accessing state pensions in the context of the insufficient savings crisis is creating the perfect storm for worsening poverty for those unable to finish 60 to remain employed.”

“Political interventions are needed in the years leading up to statutory retirement age to prevent even more people from falling into financial distress. But we also need to radically change the way we think about work, making it more sustainable and fulfilling, with better opportunities to learn, change jobs and save for a good retirement.”

In a separate report published today, Aviva warned that 3.4 million 32-40 year olds will need to retire with just £225,000 by 2050 given current low savings.

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