Over the past year, the employment rate of people aged between 50 and 64 years has fallen from 72.1% in 2020 to 71.2% in 2021.
According to the ‘Economic labour market status of individuals aged 50 and over’ report, the average age of exit from the labour market has fallen slightly for both men and women.
In 2020, the average age of exit from the workforce for men was age 65.3 years, decreasing by 0.2% in 2021.
The 2020 average age of exit for women was 64.3, and this decreased slightly by 0.3% in 2021.
Being sick, injured or disabled continued to be the main reason why people aged between 50 and 64 years were economically inactive in the labour market (with 36.9% citing this). The number of people in this age group stating retirement as a reason for not seeking work was close behind at 35.1%.
Some 790,000 people aged between 50 and 64 years were either actively seeking work, or were inactive but wanting to work, a fall from 810,000 in 2020.
Financial Planners said that they expect the drop in employment for older workers to be a short term trend and that the longer-term figures still firmly point towards people retiring later.
Keith Churchouse, Chartered Financial Planner at Chapters Financial in Surrey, said that while more clients looked to retire early in the late summer of 2020, this trend has not been long term.
He said: "We certainly saw a rise in enquiries from a range of clients and new contacts (over 55s) looking to leave employment or end their business as the effects of the pandemic began to really bite (late summer 2020), while observing at the same time increases in pension and investment fund values from the floor of March 2021. Higher retirement enquiries continued through to the spring of this year, and were not health related, more bringing forward an end to work that was originally planned for 2/3/5 years ahead.
"At one point we believed this was a firm trend, but this has now reduced, and many are staying in the workspace. We are not seeing anyone planning to work longer than originally planned but as the workloads increased, many are reinvigorated.
"One point we have noted is that those leaving the workspace are not seeking to find new work subsequently. Perhaps this will change at the end of this month when the furlough (and similar schemes) end, and with this week’s NI announcement, I fear the unemployment level of approximately 4.7% will rise."
Scott Gallacher, director at Financial Planning firm Rowley Turton, said: "Unfortunately, financial necessity will be the main reason why many people are working longer. A decade-plus of austerity, combined with low interest rates, low annuity rates, the closure of many final salary pension schemes and so on, means that many people haven't been able to save enough for a comfortable retirement. Couple this with increased longevity, and you can see why we are working longer than before.
“As a Chartered Financial Planner, I'd say that people need to save more, and start saving earlier, to have a good chance of being able to afford a comfortable retirement."
Joshua Gerstler, Chartered Financial Planner at The Orchard Practice, said: "Historically, and as bleak as it sounds, people retired at 60 or 65 and died within a few years. As people are now living longer and healthier lives they do not want to spend 20-30 years on the sofa watching Countdown. It is therefore very important to keep yourself busy, as once the mind is not being challenged, it can start to go downhill, and the body quickly follows suit.
“People are now working longer so that they have a purpose, and so that they can build up enough funds for a comfortable retirement. Someone once said, 'You need enough money to be able to sleep at night, and enough of a purpose to get up again in the morning'. That feels about right to me and goes some way to explain the changing demographic of workforces today."
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said that she would hope this is a short-term blip in employment for the over 50s and was related to the pandemic. She believed that people in these age groups can secure further employment rather than being forced into an early retirement.
She said: “Working up to, and even beyond the age of 65 is a necessity for many people if they want to enjoy a comfortable retirement. We are living longer and will likely have to work longer as a result – very few people can afford to retire at the age of 50 and the age at which people can access their state pension is increasing. Early exit from the labour market can have a huge impact on people’s financial resilience as they miss out on what is for many people a sweet spot where their earnings and disposable income are high and they can afford to make real inroads into their retirement planning.
“Working into retirement can also provide a significant boost to people’s retirement income, while others continue to work for longer through choice. We have seen the number of over 65s in work rise from 424,000 in 1996 to around 1.28m in 2021 – it is vital that the employment prospects of older workers are not damaged long term, not least because of recent government announcements that earned income from those over state pension age will be subject to the 1.25% Health and Social Care levy."
There has also been a drop in the number of people on furlough, with young people the most likely to have restarted work, according to a separate report released by HMRC.
Since the start of the Coronavirus pandemic, 11.6m workers have benefited from the Government’s furlough scheme. At the end of July 1.6m people were still on furlough, the lowest level since the scheme was introduced at the start of the pandemic.
Older workers were still most likely to be on furlough. Those aged over 65 had the highest furlough rate with 8% of workers furloughed.
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