Last month, in his Spring Budget, Chancellor Jeremy Hunt markedly outlined his priorities: getting “economically inactive” over-50s to return or remain in work, a message that sparked much debate.
Shifting employment patterns since the outbreak of the Covid-19 pandemic have resulted in a notable increase in people opting for early retirement, while long-term health issues are another major barrier keeping older Britons out of work. As a result, the Budget included several policies and reforms aiming to encourage individuals over the age of 50 to work longer or return to work, with pensions being a critical component of these measures.
However, this begs the question; is Hunt right to ask people to work longer? His motivation may be to boost the UK workforce, but should his focus not be on empowering people with the appropriate support to help them achieve their financial goals?
Inflationary woes
During the budget, Hunt’s ‘rabbit out the hat’ moment came with his announcement of scrapping the lifetime allowance. However, with only a very small portion of UK adults actually breaching the allowance, the policy arguably displays the Government’s failure to understand the needs of the vast majority of pension planners.
Instead, the Government missed an opportunity to help people of all wealth brackets, who have seen their pension savings hit hard by a year of soaring inflation. Indeed, the current cost-of-living crisis is continuing to severely strain people’s finances, making it difficult to plan for long-term goals such as retirement.
Prices are still climbing at a dramatic pace, with economists predicting that a sharp fall won’t come until the latter half of the year. What’s more, those nearing retirement are among the hardest hit, with My Pension Expert’s research finding that over a quarter (26%) of over-55s in work think they will still be working in their 70s. Meanwhile, 44% say the cost-of-living crisis has made retirement impossible.
An undervalued group
The recent pressure on over-50s to return to work also fails to consider people’s motivations for retirement. Notably, older members of the workforce are often undervalued and underappreciated within the workforce.
Recent research from WorkingWise found that 48% of workers aged 40 and above are considering retiring because they are fed up with their job. Furthermore, 51% said they need to be valued more, and 43% said they need higher pay.
Prejudices and presumptions regarding the skills and abilities, competencies, and motives of older workers are frequently made. They could be considered to be less flexible, less innovative, or more resistant to change. This may result in a lack of support for older workers’ training and development, which may further reduce their chances of progress and lower their overall level of job satisfaction.
So, whilst the Government has announced plans to launch boot camps or ‘returnships’ to equip returning over-50s with the skills they need to re-enter the workforce, it is vital that ministers engage with businesses to ensure workplace cultures are suitable for older individuals to return to work. As the aforementioned research suggests, money is not the sole motivational factor for work. Unless they feel appreciated and receive support in team integration, those who chose to return to work may find themselves leaving work once more rather swiftly.
Of course, returning to work should be a choice – no one should feel pressured to do so if they do not want to. So, it is equally important that the same level of support is given to those who do not intend to ‘unretire’.
Improving access to advice
The Government ought to empower them to plan for the future they want and deserve.
Unfortunately, the lack of initiatives to enhance pension engagement or provide access to independent financial advice is a worrying situation. Without such tools, it becomes increasingly challenging for Britons to plan for a secure, stable, and financially viable retirement.
As individuals approach retirement age, they may face difficult decisions regarding their financial future. Many have worked hard for decades and saved diligently for retirement. They should not feel pressured to delay their retirement or return to work. However, making these decisions can be daunting, and many may not have access to the information and advice they need to make informed choices.
Independent financial advisers, such as our team of experts at My Pension Expert, can help clients shape their retirement plans by assessing their financial situation, understanding their retirement aspirations, and then suggesting the right products that will align those two points.
Ultimately, empowering individuals to make informed decisions about their financial future is critical to ensuring their financial well-being in retirement. By working together, the government and financial advice sector can help more people navigate the complexities of retirement planning and achieve greater financial security and the retirement they deserve.