Retirement age for one in eight older workers derailed by Covid-19

Poorer homes and home workers tend to defer retirement, while richer households opt to retire early.

Older workers are being forced to retire later and poorer because of coronavirus, according to research.

One in eight older workers have already pushed back their planned retirement age as a result of the pandemic, the Institute of Fiscal Studies (IFS) think tank found. One in three reported a worsened financial situation.

Postponing retirement was more common among those with a pension fund that has fallen in value, after falling stock markets earlier this year led many to have to work longer to make up shortfalls.

It was also prevalent for those working from home, suggesting changes to employment structures as a result of the pandemic make it more attractive for some to carry on in their jobs.

On the flipside, around 5% of workers told the IFS they will retire earlier than previously intended.

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This was more common among richer households, but also those on furlough, potentially highlighting older workers’ fears about finding new work amid a recession and rising unemployment.

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Heidi Karjalainen, a research economist at the IFS, says: “The personal finances of many older adults are being hit by the fallout from the coronavirus pandemic. While many have wealth to help them smooth income shocks, this is by no means true of all.”

She added: “Older adults are also more exposed to financial hits to their pension saving, because being closer to retirement there is less time for fund values to recover before they might want to start drawing on their wealth.”

Many more older workers were worried about their future financial situation than those already retired, the IFS found.

Those previously struggling financially were much more likely to report a worsening of their financial situation, as the crisis widens financial inequalities within the older population. A quarter of respondents to the IFS survey reported net financial assets of less than £500. 

Kay Ingram, director of public policy at financial advice firm LEBC, said the IFS research findings show the importance of having a financial plan in place.

She says: “A good plan should focus on starting retirement planning as early as possible, not relying on the later stages of working life to fund retirement.” 

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Ingram recommends a multi-asset approach to building a pension pot to help to smooth out short-term shocks in the economy, and reducing risk on a gradual glide path to retirement, with annual reviews of the plan and making adjustments as retirement gets closer.

A significant minority of older people working immediately before the crisis are now retired: 6% of those aged 66 to 70 and 11% of those aged 71 and older.  

Among those in employment almost a quarter are either somewhat or extremely worried about their job security. Those with a health condition or disability that limits the amount or type of work they can do are particularly concerned. 

Emily Andrews, senior evidence manager at Centre for Ageing Better, says: “We know that once out of work, over-50s struggle more than any other group to get back into employment, and we must not let a generation of older workers write themselves off prematurely. 

“In addition to the kickstart scheme for younger workers, we need to see targeted support for over-50s to get back into work, retraining opportunities for over-50s, and a strong message from government that over-50s are just as entitled to jobs as younger workers.”

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