Employees should be able to take a “phased approach” to retirement by being able to withdraw parts of their state pensions when they reach retirement age, while continuing to work for as long as they wish.
This has been suggested by insurer Aviva, which found around a third (32%) of mid-life employees believe they may not have enough money to retire when they choose.
It suggested that enabling flexible state pension access from the age of entitlement would remove the “all or nothing” choice that some older people face.
According to its analysis of Office for National Statistics data on pensioners’ sources of income in 2017-18, 43% of older people relied on the state pension in retirement and only 32% had a private pension.
It found that almost half (49%) of UK employees aged 45 and over are considering working for longer or are already working beyond the state pension age.
Lindsay Rix, Aviva’s CEO of UK savings and retirement, said: “We believe the choice between claiming 0% or 100% of the state pension no longer reflects our increasingly flexible working lives and we are calling on the government to allow individuals to make flexible withdrawals from their state pension when they reach their state pension age.
“We believe the state pension age acts as an artificial ‘hard line’ in the working lives of many. If we fail to prepare for an ageing workforce, the consequences will be damaging for generations to come. Not only could we see an increase in poverty in retirement; but also, a greater strain on our working population and a UK restricted from investing in its future as it struggles to navigate its present.”
In its report, The UK’s Mid-Life Workforce: navigating uncharted waters, Aviva suggests that mid-life workers would benefit from a “Mid-Life MOT” that encourages them to consider their wealth, work and wellbeing needs from the age of 45 and to plan for their futures. The insurer has already run such a programme with its own workforce.
It says that by better supporting mid-life employees, employers will unlock potential across the workforce and see productivity gains through enhanced participation in later life. Retaining this part of the workforce will also help minimise any staffing shortfalls.
Rix says: “The number of mid-life employees continues to grow to unprecedented levels. Aviva has learnt a huge amount about the challenges and opportunities facing this population from the delivery of our Mid-Life MOT programme.
“We’ve learnt that employee demand is great, and that their appreciation is strong. We’ve also learnt that the business case for investing in this area is robust…We want industry, employers, regulators and policy makers to work together to make sure that easily accessible help is there for everyone.”
The report suggests using Aviva’s Mid-Life MOT programme as a blueprint: once a year, workers aged 45 and over attend a two-hour face-to-face group meeting led by experts in the fields of finance, pensions, and health and wellbeing.
It claims that since the programme was introduced within Aviva, it has seen improved retention; increased personal saving for retirement; reduced absenteeism; increased productivity; and an erosion of cultural misconceptions about age in the workplace.
The report also recommends that:
- the government and the Pensions Regulator consider how they can close the UK’s pensions advice gap
- a single government lead for ageing in society is created
- the government introduces a tax system, via reliefs or deductables, to incentivise age-related investments by employers
- an “educational hub” is introduced on all pension dashboards, directing workers towards services like the Money and Pensions Service and the Department for Work and Pensions’ Mid-Life MOT.