All work and no play

The government’s White Paper on pension reform made much of the idea of getting people to retire later, even before state pension age starts to be pushed up. Indeed, it is suggested the extra GDP produced could go a long way to offset the extra pension costs that will arise from longer working lives.

The government’s work is partly done for it by the decline in good-quality early retirement packages from pension schemes, but its targets for bringing people back off incapacity benefit and into the labour market are seen as ambitious.
The Security in Retirement White Paper sets out the government’s philosophy and targets for longer working lives.

Longer employment, it says, is the logical response to an ageing population. The more people in work and contributing to the growth of the economy, the more funds there will be to support those people who are in retirement. The overall aim is for 80pc of those of working age to be in employment, and within this the government has set itself the target of increasing the number of older people in work by one million.

If it succeeds, the ratio of non-workers to workers will be lower in 2030 than it is today, and even in 2050 it will only have crept up to around 1:15 from today’s 1:09.

On the Treasury’s calculations, reaching 80pc would increase GDP by perhaps 2.7pc by 2050, and this in itself would increase the income available to pay for state pensions.

However, this is going to be challenging. For those over state pension age, under the coming age discrimination regulations it will remain lawful for employers to push people into retirement at 65, so long as they have accorded them the courtesy of having a meeting and listening to their plea to stay on – though with no need to give reasons for rejecting it.

This is not popular. A recent survey by Age Concern’s membership group Heyday found 80pc of those responding thought there should be no forced retirement. Prompted by this, Heyday has gone to court to seek a judicial review of the regulations, which it believes are out of line with the European directive on which they are based.

Heyday communications director Neil Churchill says: “We are determined to challenge the existence and legality of forced retirement. It is what people approaching retirement want; it is good for business, good for the economy and good for society.”

Working on after 65 is always likely to be something of a minority sport, however. One survey for the department for work and pensions a few years ago found those who were doing so were people who were not going to be well-off in retirement because of low or not occupational pensions, outstanding mortgages, and – for women in particular – being separated or divorced.

For the option of working on to be realistic, they needed to be in good health, with a reasonable level of education, and in one of the more affluent areas of the country. Even then, they tended to be working only part-time, and only for a few years beyond state pension age.

It was far more likely, the study found, you would stay in employment after state pension age if you had managed to retain your job until then. Here the changes in the pensions industry will help the government meet its targets, by making it less attractive to go early.

The days of generous early retirement packages from employers anxious to “downsize” their workforces without fuss are nearly over. Ill-health retirements are harder to get, and there is pressure to push up normal retirement age as a way of covering final salary deficits.

Friends Provident, for example, has recently announced that its pension scheme members will have the “choice”, for future service, of paying a much increased contribution or accepting a rise in retirement age to 65 and a slightly reduced contribution.

In the public sector, unions have largely fought off the rise in retirement age for existing employees, but given the level of turnover at least at the lower grades, it will not be many years before the majority of them too have a 65 retirement age.
Similarly, the design of money-purchase pensions generally discourages early retirement because of big actuarial reductions. However, in times of stock market boom, there may be a temptation to take the money and run, which employers will be unable to combat.

Employers are now more willing to recruit older people. A recent survey by the Chartered Institute of Personnel and Development found 70pc of employers were actively seeking to recruit people aged between 55 and pension age, and 31pc looking for people already receiving a state pension.

Others, though, detect a reluctance to give training to people beyond a certain age.

Trades Union Congress assistant general secretary Kay Carberry says: “There are still stereotypical attitudes about what older people are capable of. There is a very widespread view they are not trainable, they will not be flexible and they will not be adaptable.”

One organisation that has bucked this trend is B&Q, which has made something of a selling point of its employment of older workers.”

Head of pensions at Kingfisher, B&Q’s parent company, Colin Hately, told the National Association of Pension Funds’ annual conference: “The same B&Q training is given to 16-year-olds and 92-year-olds.”

Finding jobs for older people who have been unemployed or sick for several years is going to need government resources of money and time.

The CIPD says 18pc of employers will not consider people who have been on incapacity benefit because of mental health problems, and 10pc will not consider those who have had physical ill-health.

The private sector, particularly manufacturing industry, has a worse record than the public sector, with a quarter of manufacturing employers refusing to consider incapacity benefit claimants with a history of mental ill-health.

However, much of this was down to worries about lack of skills, with almost two thirds of the employers in the survey saying that their attitudes would change if grants were available to assess and improve the skills of potential recruits.

CIPD chief economist John Philpott says: “You have got to win the hearts and minds of employers. With a bit of extra support, and some effective work across government departmental boundaries, employers are sending out a clear message that they have a positive role to play in achieving the government’s 80pc target.”

There is already some help available, but it is little known about. The Access to Work scheme, which provides grants worth £59m a year to help with the cost of adaptations to help people with disabilities keep their jobs or find new ones, has been described by the British Chambers of Commerce as “one of the best-kept secrets in government”.

Sadly, rather than spending more money on this, the government is planning to make its own civil service departments find the cash for such adaptations themselves, reallocating the ATW fund more towards small and medium-sized firms.