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Do you expect to have retired by the age of 70?
The answer partly depends on how you define retirement, but the pipe, slippers and cruise ship variety that previous generations have enjoyed is something that feels alien and unachievable for most workers today.
Rising life expectancy combined with less generous pensions mean that over two-thirds of UK adults believe that retiring in your 60s will become a thing of the past, according to research this week from Canada Life, the retirement specialist.
Intergenerational tensions run through its Life100+ study exploring the “longevity megatrend”. Respondents in their 20s and 30s already believe they are worse off financially than their parents. In some cases, those in their 40s and 50s were juggling the additional burden of caring for the older generation. Although most respondents expected to receive an inheritance (eventually) very few reported actually having had a conversation about it. This doesn’t bode well for optimising tax planning in the Great Wealth Transfer.
Meanwhile, the so-called Bank of Mum and Dad is doing a brisk trade. Canada Life’s data shows that 19 per cent of respondents aged 65 and over are still providing financial support to their adult children. Help with house deposits and mortgage costs are increasingly common, but many are being relied upon as a source of free childcare.
Given all of the financial and demographic pressures, delaying retirement and working for longer feels like the obvious solution. But even if you’re healthy enough to carry on, there’s one big problem. Recruiters seem to have missed the longevity memo.
“How we evolve the longevity of work is a pressing issue,” says Lindsey Rix-Broom, chief executive of Canada Life. Any readers made redundant in their 50s or 60s will know how difficult finding your next gig can be. Advances in AI and digital technology could make it even harder to adapt your skillset and perform a late career pivot. Yet employers may soon be forced to reconsider the value of older workers.
Recruitment consultancy 55/Redefined predicts that within the next 20 years, the UK’s working age population (16-60) will shrink by 25 per cent. During the same timeframe, the number of over-60s is expected to grow by 40 per cent — and judging by the UK’s pension undersaving problem, many won’t be able to afford to retire.
It is advising a host of companies on how to recruit the over-50s, and help those already in the workforce to stay for longer by upskilling and retraining. Ageism is too often overlooked in corporate strategies on diversity, equality and inclusion (DEI). Two-thirds of British businesses have no plans to report on age as a diversity measure in future.
For many older professionals pushed out of the workforce before their time, the solution has been developing a “portfolio career”; taking on freelance consultancy work, setting up their own business or (if they’re lucky) serving as an non-executive director.
Depending on your financial situation, this could be a useful “retirement bridge” until pension savings from previous workplaces come into play. Yet Rix-Broom notes another challenge — how detached many people tend to be from their long-term savings. “We can all probably say how much we have in our current account, or savings account, but the vast majority of the population wouldn’t be able to tell you how much they have invested in their pensions,” she says.
I suspect most people are too busy worrying about managing their finances today to give much thought as to how they will cope tomorrow. Pension providers are attempting to fill the engagement gap with all kinds of digital solutions (I tried out the Scottish Widows’ “Pensions Mirror” on my Instagram account this week) plus the long-awaited Pensions Dashboard will undoubtedly help people manage multiple savings pots.
Yet even those who have successfully amassed enough money to achieve a traditional retirement are seeking out something more rewarding.
Professor Andrew Scott, the economist and longevity expert, talks about the “second demographic dividend” of living for longer. He has calculated that those who live to 100 have around 100,000 extra productive hours to offer society compared with those who live to age 70.
So what could you do with them? I am a member of the UK Fire HQ group on Facebook — this stands for achieving Financial Independence and Retiring Early — although precisely what the “R” word means is a bit of a moot point.
Many of my fellow members can afford to retire in their 50s and 60s, but choose to keep working. The key difference, says one, is no longer needing to work for money. Another prefers the term “recreationally employed”, which I love. He points out that if you have invested enough money to make work optional, you have far more choice about what work you might seek, and on what terms.
Many have taken on fulfilling, yet low-paid, work after retiring from their “career job”; others have embraced voluntary roles at charities and some are serving as local councillors. It’s not all work, of course; spending more time with grandchildren, enjoying hobbies and travelling also figure highly. But one member made the point that after we leave the world of work, we could add even more value to society than we did as employees focused on generating returns for shareholders.
When we think about retirement planning, we need to move away from the idea of stopping work, and towards proactively preparing for the next act in our working lives — be this a career pivot, a portfolio career or choosing to give back.
There are all kinds of online widgets to help people figure out whether they’re saving enough for retirement, but few that tackle this area. One I would recommend is the excellent free diagnostic tool on Prof Scott’s 100 Year Life website. Spend five minutes answering questions and you’ll be scored on how future-proof your “assets” could be in later life, including your career, skills and lifestyle, with suggestions on how to optimise these.
However you envisage your retirement, saving enough to fund your future life is vital. Yet investing time in acquiring new skills, building your network and improving your health and fitness are all just as important.
Claer Barrett is the FT’s consumer editor and the author of ‘What They Don’t Teach You About Money’. [email protected] Instagram @Claerb