/ Money

Will our children work until they’re 75?

Every year, more and more people in the UK are working past the state retirement age. So I started thinking, should there be a prescribed age, or should people get to choose exactly when they retire?

A recent report from the Office for National Statistics (ONS) found that the number of people working after state pension age has gone up from 753,000 in 1993 to 1.4m in 2011. This means an average 12% of people who currently work fall into that category (14.1% in London and the South East, 8.2% in the North East).

Two-thirds of these post-retirement-age workers are employed in part-time jobs, but the fact remains that they’re continuing to toil beyond the point where they could legitimately put their feet up and take a well-earned break.

The ONS speculates that improved health and well-being might lay behind the increased number, combined with a desire for older workers to ‘remain active in society’. However, it also acknowledges that ‘financial pressures’ may play a part too.

Can one size fit all?

We’ve talked about this topic before when the government accelerated the rise in state pension age for women and brought it forward for men. I wondered if one size really did fit all, or if it might be better to let people decide for themselves when they’re ready to call it a day?

My colleague Martyn Saville had a different take on retiring later, arguing that people who stayed working later prevented those at the other end of the job ladder from getting on the first rung. ‘Repellent’ and ‘morally indefensible’ were a few of the comments he received on his post, although others seemed to think he might have a point.

Personally, I rather like the idea of a choice. If part-time work after retirement age could make the shock of stopping work less abrupt, perhaps we should encourage employers to make part-time work available earlier for those who want to ease off.

Retirement ages on the up

We should also bear in mind that the minimum pension age is increasing anyway, so rather than discussing the choices of those aged 60 or 65, we’re increasingly thinking about those aged 66, 67 or 68.

At a conference the other day, I heard a speaker (seriously) suggest that today’s children might need to keep working until they are 75 or older simply to save up enough pension to retire. Is this the harsh reality that underpins this whole debate? I may want to retire early – but can I really afford to?

Comments
Member

One of the reasons why people cannot afford to retire is their lifestyle.

I’m not trying to put tradesmen out of business but many people pay for jobs to be done when they could do the work themselves. Over the years, that could save a fortune.

A fancy car or expensive house might impress your friends and massage your ego, but having to work longer to pay for this and other expensive purchases and their upkeep not be be the best decision.

Apart from making it more difficult for younger people to get jobs, I am happy for people to work as long as they wish to, but it’s sad when this is a necessity brought about by an extravagant lifestyle. Many enjoy work because it gives a purpose in life. Working for a charity can do the same, if you don’t need the money, and makes paid jobs available for younger people.

Member

Wavechange – One of the main reasons why people cannot afford to retire is because they do not get a large enough pension in the first place to live. They live BELOW the poverty line. The majority of the people in my OAP club are in that position. They never earned enough when working full time to afford the greater contributions required for a private pension. Nor do they wish to be regarded as scroungers or beggars – as so many people seem to regard pensioners as now. Their lifestyle consists of watching TV – going shopping – and going to the OAP Club (especially during the winter to save heating) for a cup of tea and a free sandwich. Also may I point out vast numbers of OAPs are unable to do household repairs for health reasons – not to mention it requires some skill.and knowledge to do the repair properly – I can – but an enormous number can’t which is why I help them. In no way do they live “an extravagant lifestyle” .They survive – just.

Member

I agree with you Richard. I am also very impressed what you have done and continue to achieve.

Clearly there are people who have been unwell for years or there is some other genuine reason (e.g. long-term caring for dependants) why they are in financial difficulty, but many more people could and should have made financial provision for their retirement.

I know several people who are now struggling because of an extravagant lifestyle. One couple used to waste money by frequently moving house, having the car valeted, etc. Another ran up all sorts of debts and eventually went bankrupt, leaving many unpaid bills, including money owed to local tradesmen. In both cases they were otherwise sensible people. It is well known that many are living beyond their means and not even trying to save.

I think we both have valid points.

Member
Malcolm Kenward says:
22 June 2012

Both my (elder) brother and my (younger) wife sent forms to The Pension Service stating they were deferring their state pensions. And both subsequently received PAYE Coding Notices which on the reverse under Notes 3, stated “We know you receive the state pension or another taxable state benefit and we have estimated you will receive £nnnn this year.” It goes on that because it’s not taxed at source they (HMRC) have to obtain the tax due.
In my wife’s case, they calculated that she owed tax from 2011-2012 and they gave her a tax code to recover the amount owed as well tax on the pension for 2012-2013. She phoned HMRC and the problem was apparently resolved; she got a revised code for 2012-2013. However, on her first pay slip afterwards, her employer had used the incorrect Tax Code; on enquiring they stated they hadn’t received the revised code from HMRC. Another phone call to HMRC to chase this up. The next pay slip still used the incorrect tax code; again her employer hadn’t received the new code from HMRC. So she is now owed probably about £800 in overpaid tax, give or take.
It is clear there is no communication between the two government departments involved. It seems they automatically assume you’re taking your pension and rely on you to contest the fact.
Yet another example of inefficient government bureaucracy, which we are all paying for.
I’ll let you know if her next payslip has the correct tax code!

Member
GeoffD says:
22 June 2012

I deferred my state pension as I was getting sufficient with my employment pension and returns from a hobby of about £3000 a year. After 18 months, I thought from articles I read that I wasn’t gaining anything by deferring. However, after a good year giving me another £1000, this raised me just above the lowest tax limit that we pensioners are allowed (I forget what they call the figure). Income tax was applied disproportionately, which gobbled up most of the extra cash I’d earned. It therefore seems I would have gained by continuing deferment, and note from this Which? report that I can get a second chance to defer, which I was not aware of before.

Member

Which? articles seems to suggest that deferring your state retirement to receive an increased pension at a later date is a good idea if don’t need the pension immediately, but what is the break-even point on this? If I don’t take the pension now I am losing the income from the pension and any interest I could have earned on that income. Can someone clever than me calculate how long I would have to live for that lost pension income and interest on that income to be made up by the additional pension I will receive at whatever point in the future I take the enhanced pension? If I’m in profit 5 years after taking the enhanced pension that sounds like a good deal, if it takes 10 or 15 years to recoup the income from pension payments I have foregone it doesn’t sound so attractive. My guess is that the break-even point will come out somewhere close to average life expectancy.

Member

My wife deferred hers for 4 years, now regrets it because annual increases have been significantly lower on the deferred element of her pension that the basic element. Had we known that when we did the sums, before making the decision, she wouldn’t have deferred. We feel thoroughly ripped off.

Member

The Which? article states “The pension you receive is based on the current rate, so includes any increase that has occurred during the time you have not been claiming.” That seems to contradict … Can someone clarify thsi?