Although the number of redundancies has fallen in recent years, the proportion made up of over-50s has risen sharply (see charts below). While most age groups are on a downward trend, for older workers it has risen from 24% of redundancies in 2000 to 34% last year.
“At a time when people are being urged to work later in life so they can build up adequate retirement funds, this is a worrying trend,” said Stephen Lowe, group communications director at specialist financial services company Just.
He said that redundancy later will often have a big impact on pension saving by reducing contributions. Even where the investment can be made up later, it has less time to grow unless retirement is delayed.
It is also harder for older people to find another job, with just 29% of those in the over-50s age group finding work within three months, compared to 44% of those aged 35-49. And over-50s are more likely than other age groups to still be unemployed 12 months later.
“Not only is the job market slanted in favour of younger generations, they also have a lot more time to recover financially than older people,” he said.
The threat of redundancy, along with the possibility of sickness, is a warning for people aged over-55 to think carefully before cashing in pension savings believing any shortfall can be made up later.
“Our research found that 42% of people aged over 65 said they were forced to retire or go part-time earlier than expected due to circumstances beyond their control, and that number was higher among the recently retired,” said Stephen Lowe. “In most cases, the reason for having to stop work early was either redundancy or poor health although in some cases people could no longer physically do the job or had left work to become carers.”
He said that early access to cash and the fact that State Pension Age was increasing meant more people were likely to fall into a ‘pension gap’.
“Ideally people in their 50s should have a financial plan to deal with some of the ‘what ifs’,” he said. “It’s hard enough to build up a big enough private pension to deliver the required income even for those with an unbroken work record up to State Pension Age. That becomes nigh on impossible when people miss months or even years of work, losing out on contributions.
“Our advice is ‘mind the gap’ – cash released from a pension today is going to leave you financially less well-off tomorrow.”
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