Retirement is billed as something to look forward to – a time to relax, travel and do as you please after years of working hard. For many, especially homeowners with generous private pensions, it is just that, but with nearly two million pensioners living in relative poverty, it is far from a universal experience.
Rising life expectancy, increased care costs and shifting government policies – including speculation that the triple lock state pension is now unaffordable and that the pension age will rise to 70 – are forcing people to work longer.
So is Britain’s retirement dream over? Nigel Kendall, Callum Mason and Hamish McRae offer their perspective.
Look at any advertisement aimed at retired people and they are all the same. Usually it’s a couple, rather than a single person, and they are enjoying life in some glamorous location. They are on a cruise, or playing golf, or chatting on a walk together. They are young retired, not old retired, and – big point – they always look as though they have plenty of money.
The reality, alas, is often quite different. It is true that there is a lot of evidence that older people are happier than middle-aged ones. Peak unhappiness, apparently, comes at age 47. However many people are not saving enough money for their retirement, with the Institute for Fiscal Studies calculating that around one-third of current private sector employees will not have adequate incomes post-work.
So what is adequate? The Pensions and Lifetimes Savings Association has done some basic sums. It sets out three levels of retirement: minimum, moderate and comfortable. For a single person the amounts needed are: £13,400, £31,700, and £43,900. For a couple it’s: £21,600, £43,900, and £60,600. To give you a feeling for each, the minimum envisages no car, a free bus pass and a couple of taxis a month, plus a one-week holiday in Britain. Moderate is a small car, and a two-week 3-star inclusive holiday in the Med. Comfortable is also a small car, though replaced more frequently, plus a 4-star half-board holiday, plus three long-weekend breaks.
All those advertisements are showing people who are well into the comfortable bracket, indeed in most cases far above it. So while two people with a full state pension would be able to cover their minimum costs, a single person couldn’t, and to have the sort of lifestyle the adverts portray you would have to have a very substantial private pension.
Besides, all these calculations don’t allow for emergencies: having to help the children or family members if a relationship breaks up or someone loses their job, needing a hip operation and not wanting to wait for the NHS to do it, or even the costs of care. According to Age Concern the average cost of a care home last year was £949 a week, and a nursing home £1,267 a week. That’s £49,000 and £66,000 a year, which at the top end would need a pre-tax income approaching £100,000. Given the inflation in care home costs over the past year, those numbers will be significantly higher now.
If all that leads to the rather dismal calculation that a secure and comfortable retirement requires a huge amount of money and given that most people have saved nowhere nearly enough, there is another crucial element to consider too.
At 66, the current state pension age, 29 per cent of people are still in work, and 10 per cent are still working into their seventies.
By this stage of life, late sixties and early seventies, most people still working are self-employed, which raises further questions. For example, are employers doing enough to encourage older workers? And to what extent should people who would like to carry on working prepare for this stage of their lives? Should they set up a freelance business in their fifties, so if they cannot find a job at state retirement age and want to go on working they can always employ themselves?
Everyone is different. For many, retirement is indeed an escape from the drudgery of the workplace, and the challenge for them is to have saved enough to afford the lifestyle they would like to have in their seventies and beyond. But for a growing proportion of older people, there is a different vision of their senior years.
It is one where they carry on working in some form of other, either paid or in a voluntary capacity, because they want to contribute to society. We still think of retirement as a single and irreversible shift from one status to another.
It won’t be like that in the future. We will have to start thinking about a gradual shading back of the time we work, maybe as early as in our fifties, and switching from having a boss to working for ourselves. This is already happening. Nearly half of the people still in work aged between 70 and 79 are self-employed, and more than half of the over-eighties are. If you work for yourself you choose your hours, and you can’t be sacked. All you have to do is find customers.
Of course not everyone will want to work into their eighties, or indeed have the health and opportunities to do so, and at the moment the numbers are quite small – only about 35,000 people. But most of them are doing so by choice and as society ages more and more people who want to work will find they are pushing at an open door.
It’s a rather different idea of retirement from all those advertisements for cruises in the Med, but for many it will turn out to be a much more satisfying one.
