The days of suddenly switching from full-time working to not working at all at retirement age are rapidly disappearing. The so-called ‘unretired’ are growing in number, with governments around the world encouraging people to work beyond retirement age.
The Office of National Statistics reports that more than ten percent of people in the UK aged over 65 are working. This compares to just five percent through most of the 1990s.
For some people it’s simply the fact that they enjoy their job and wish to delay leaving. Others may need income to supplement their savings or pension income. The fact that people are living longer may also be having an impact.
Writing for Forbes.com, Eric Brotman neatly sums up this view of retirement: “To find true fulfilment in this stage of life, we need to stop thinking of retirement as the end of our working years. In fact, retirement is not an ending at all, but our next graduation – the graduation from NEEDING to work.
“When we stop thinking about retirement as our last day at the office, we leave the door open for endless possibilities. The day you retire is the day you can claim financial independence - you no longer need a regular pay check to survive. Does this mean you have to stop working? No. It means you can, if that’s what you choose.”
The GOV.UK website provides useful information on working beyond traditional retirement age:
There is no official retirement age – a law forcing you to retire by age 65 was scrapped in 2011.
The law protects you against discrimination if you’re over State Pension age and want to stay in your job or get a new one.
Some employers do however have the right to set a compulsory retirement age, including where the job requires certain physical abilities.
If you work beyond State Pension age, you’ll no longer have to pay National Insurance.
In other words, in most cases you are free to work for as many years as you wish.
We will see even more of this trend in the future. In response, employers and governments will need to rethink the traditional way of doing things. Indeed, some are already doing this. Here are some examples:
In Australia, a ‘work bonus’ is available to pensioners who choose to keep working. It allows them to keep more of their pension when they have additional income from working.
In France, the official retirement age is 62. However, people don’t receive the full state pension amount until age 67, as the government encourages people to work later.
Workers in the Netherlands, are also being incentivised to work longer, with contributions for employees and bonuses for employers.
Switzerland encourages later working by setting pension entitlements much higher for people who retire five years after the standard retirement age.
The prime minister of Japan has proposed allowing people to defer their pension to age 70, with incentives for doing so.
Global HR consultancy firm Mercer reported in 2018 that more than two-thirds of adults expect to work past a traditional retirement age. If that proves to be the case, it will be a massive increase on the already growing numbers of people working longer.
Even if you choose to work longer, making the right choice about your pension income could be vitally important. The main choices include drawdown, where one’s retirement income depends on investment returns, or an annuity that provides a guaranteed level of income payable throughout one’s lifetime.