“As the reality dawns on more and more generations that defined contribution pension schemes do not deliver the sort of outcomes they were expecting and that they are going to have to work longer and save more, this will have knock on effects for employers, who are going to have to deal with an ageing workforce, or provide a pensions incentive to retire.
“Figures recently released by the Office of National Statistics based on the 2011 statistics shows 10 per cent of the over 65s are still economically active. For the age group 65-75, some 16% were still working compared to 8.7% of the same age group in 2001. Of those aged 75 plus, some 3.6% were still working. There may be a number of reasons for this such as the abolition of the default retirement age, but some of it is no doubt down to the fact that some people cannot afford to retire.
“Whilst I am fully supportive of anyone who wants to work on into their later years, my concern is for those who are forced to work on, especially where they have been making substantial contributions to pension arrangements, only to find they do not deliver the sort of income that allows an adequate retirement. And I don’t just mean not enough money for holidays and new cars, I mean not enough to live on.
“Employers paying minimum amounts in automatic enrolment schemes today may take the attitude that it’s not their problem. But even in 10 years’ time, if the number of over 65s in work continues to rise at the rate it has in the last 10 years, we could easily see about a third of the 65-74s still in work.
“Not only will it stop employers hiring younger (and perhaps cheaper) workers, but it will generate other problems. A recent Office of National Statistics report says only half of the over 65 year olds in 2011 said they were in good health. So, unless employers will still need their workers when they are 74, they need to ensure their workers’ pension arrangements provide sufficiently for a retirement earlier than that.
“All this comes in the week when a report by NOW suggested a third of us believe “Generation Y” (those in the age bracket 18-31) will struggle to save enough ever to retire. What surprised me was only 51% of them said they believed they would be worse off than their parents when they retire.”
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