Retirement Reform?

It was interesting to attend the Institute of Directors’ Roadmap for Retirement Reform presentation last Monday (October 19th) which they used to announce the launch of their new Centre for Retirement Reform.  On the face of it the presentation looked as if it would be largely about pensions but fortunately – and refreshingly – all the speakers seemed to recognise that pensions reform per se is not going to be enough.  Of course it was useful to be reminded yet again that our current pensions system was introduced when the average male life expectancy was 63 – what clearer evidence is needed of why it is no longer fit for purpose? But beyond this, the clear message from all seemed to be that meaningful impact in terms of reforming “retirement” will only come when employers create the culture, opportunities and support to help those people who want to, or need to, stay in work for longer. 

We look forward to finding out more about the work of the Centre as it develops. At this stage, perhaps we have two caveats.  Apparently one of the Centre’s first areas of interest is to be what are commonly labelled “olderpreneurs” – older individuals who start their own businesses. In respect of this we take the view that the focus needs to shift from helping older people to start a business (generally comparatively easy) to helping them build and sustain their business (difficult). Otherwise all that is happening is encouraging a new generation of business lemmings, racing towards a cliff-edge of failure and disappointment.  Additionally, and on a different note, we yet again call for the development of a new terminology. “Retirement” will only truly be reformed when we have an adequate vocabulary to describe all the various states (non-working, part-time working, portfolio working, self-employment, volunteering, etc) that are currently covered by this outmoded term.

 

 

Increasing State Pension Age: black and white…..or grey…?

Conservatives’ plans to raise the state pension age to 66 will make youth unemployment worse leading to a 200,000 rise in unemployment in the first year – many of whom could be young jobseekers. This is the view of Ray Barrell, Director of Macroeconomic Research at the National Institute of Economic and Social Research who made his prediction at this week’s Just Ageing Seminar, hosted by the Equality and Human Rights Commission (EHRC). He supported his case by commenting, “If we extend working lives effectively the people we will have to help in the labour market are not those who are in a job and can stay in it for another year, but those at the other end of the labour market who are looking for a job, and the job that would have come up for them is no longer available.”

Stirring stuff when accompanied by alarmist headlines such as Tory plan to raise pension age will add to youth unemployment (Personnel Today)

But surely it’s not that simple. Not only do young, incoming job seekers not automatically replace outgoing retirees due to lack of similar skills and experience, but not all older workers are going to want to keep working or, if they do, to keep working in the same job. Research has shown that later life career changes are becoming more desirable for older individuals with those who want to work increasingly seeking to do so under their own terms. And for many those terms mean working less and working flexibly. The sooner employers start to address these issues, the sooner we should stop hearing these types of argument which effectively are comparing apples with pears – and ultimately just don’t add up.

Indeed, the Personnel Today article does not reflect a balanced view of proceedings at the Just Ageing Seminar. In particular, Sheila Wild, Head of Earnings and Age Inequalities at EHRC, arguing why the Default Retirement Age should be removed, said “ It is not a contest between older and younger workers, but about ensuring everyone who wants to work has the appropriate skills, whatever their age. The UK Commission for Employment and Skills has predicted 2 million new jobs between now and 2020 – and most of them will demand higher level skills. In securing jobs coming out of recession, skills levels are likely to be the key factor, not age”.

A grey day for Heyday? Not in the longer term.

And so the “Heyday” case has finally drawn to a conclusion with seemingly disappointing results. Even in its final battle Heyday was destined to be a loser and its (poorly chosen) name will thankfully fade away into history. Let’s hope the new merged charity sticks to its knitting and does not make the same mistakes again. However, that is another story – for another day.

On the surface the outcome of the Heyday case is unhelpful, certainly to those who have had age discrimination cases pending. Much has already been written in the press about the case and we don’t wish to go over this ground again. The judge took a particular standpoint based largely on a historical perspective and this has let the government off the hook, at least in the short term. However, moving forward, it will clear the air and allow fresh and proper thinking instead of continued attempts to justify the previously taken, and very weak, position.

The demographics are moving one way only. The financial concerns of our older citizens and of government are moving one way only. And the skills needs of industry, business and employers at large are moving one way only. The debate can, therefore, move in one direction only. Nevertheless, it has to remain top of the agenda and we applaud all of those organisations which are fighting and lobbying to bring about the necessary changes, sooner rather than later.

We, at in my prime, have a slightly different perspective. We are more concerned with the next phase. How are employers going to manage their older workforces? How are individuals of any age going to plan for the rest of their lives, find the right balance between work and non-work, and determine the necessary stepping stones? And how are employers, employees and government going to work together to find solutions which are in the best interests of all concerned?

The Heyday judgement is just a temporary setback – but nothing in this life worth having comes easy.

The fun has just begun

This week has already seen two very major announcements relating to the older end of the age spectrum and it’s only Wednesday. Firstly, there has been the news that the government is bringing forward its review of the national default retirement age, currently 65, which heralds either its demise or a significant shift upwards. Secondly, there has been the publication of a Green Paper on the subject of care costs which is likely to impact on the whole population and probably require significant financial input from us all.

We are now, quite definitely, going to see a significant shift in the need for everyone – employers, employees and society at large – to think through the implications of these issues and to plan individually and collectively for all of our futures. We will now, each of us, have to make decisions about our attitude to retirement versus continued employment which will include our finances, our motivation and commitment, and our physical and mental ability to continue on.

These announcements come at a time when two new surveys suggest all is not as it should be and certainly there is a glaring inconsistency and incompatibility which will have to be addressed. A survey for insurer LV= suggests that the over 50s are struggling to save and that nearly 7 out of 10 are worried about their retirement prospects. In reinforcing this Scottish Widows also tell us that, from their survey, the average age that people wish to retire is 61 and that, on average, they would actually be angry if they had to work past 66. Something does not stack up here – even without thinking about the social benefits of continuing to be part of the employment mainstream.

Employer body reaction to the proposed review of the default retirement age is predictably one of hostility (feigned or real) but the reality of the situation will not change. What is required, sooner rather than later, is the need for all sides to start seriously to manage the implications which, when all is said and done, will be immensely positive for all concerned.

Even King Canute could not stop this one.

Saving for retirement – the biscuit tin approach

Hardly a day goes by now without another piece of depressing information about the state of the nation’s pensions. In the last few days alone we have seen more defined benefit schemes closing, more reports on the lack of savings that individuals are making particularly during the recession, and soaring bankruptcy numbers among pensioners. One report, highlighting the fact that many are now unable to foresee when they might retire or how they might have adequate savings to live on, has  coined the term “baby gloomers”  to describe the plight that people feel they are in.

The advice that comes from the financial industry is plentiful but very self-serving: “save more for a pension”; “release some equity from your home”; “tuck your money away in an ISA”; “invest in buy-to let”; and more. The government believes that the answer lies in personal accounts which everyone will flock to in a few years’ time – we will see.

Many people, knowing their savings are insufficient but not by how much, would like to work longer, certainly past 65. Yet the government is still dragging its heels in a most extraordinary fashion. This is despite the fact that change is inevitable. The state pension age will be increasing to 68 in the coming years but the default retirement age is currently 65. What are people going to do –starve for three years? One glimmer of hope that the recession is providing is that firms are beginning to see the futility of redundancy as an answer to their problems and are looking at more innovative ways of managing the current problems with flexible arrangements, part-time working, sabbaticals etc. all now featuring. These are also ideal tools for dealing with an ageing workforce.

However, the first problem that must be addressed is one of awareness. There is, in the country as a whole, an order of magnitude lack of understanding among people of all ages as to exactly what it takes in financial terms to retire in some form of comfort. A fundamental and far reaching “reality check” is needed to reconcile the aspirational dream of an interesting, financially secure retirement with the ongoing provision that individuals are making through their working lives.

Retirement financial planning involves running up a store of wealth, retiring, and then running it down again over the course of the rest of our life – as simple as that. Building up a retirement pot is very much like tucking money away in a biscuit tin each week to save for Christmas – except Christmas may last twenty years or more.

For more see  Saving for retirement – the biscuit tin approach

Tax free flexible work for the over 65s.

Consultant director of think tank Reform, Professor Nick Bosanquet, has called on the Government to scrap tax on employed over 65 year olds to encourage older people to continue working into retirement.

Speaking at Standard Life’s The Death of Retirement conference on Feb 4^th, Bosanquet suggested that in the current economic climate older people would struggle to stay in the labour market. He said: “We are going to have a period of low interest rates which have already reduced the income and consumption of pensions and we are going to have a period in which there is job rationing in the labour market. Against that background how do we incentivise people to stay in work? My key change would be to make work after 65 virtually tax-free.”

At the same conference his colleague, Reform Director Andrew Haldenby, said that the government needed to do more to encourage people to take control of their retirement and be more active while the Conservative party’s pensions spokesman, Nigel Waterstone MP, called for pensions in the UK to be made more flexible.

All of these approaches are laudable but a combined onslaught of change on numerous fronts is urgently required if any real progress is to be made. Mandatory retirement ages need to be scrapped so that older individuals can neither be forced out of the workplace nor made redundant at 65 plus. Flexible working should also be introduced alongside flexible pensions. And a programme of education about the meaning and implications of pensions and retirement should be introduced to enlighten both employers and employees themselves – from an early age.

Flexible futures for the over 50s

On 1 April 2009, the government is intending to extend the right to request flexible working hours for parents with children up to the age of 16. According to a report on the HR Zone website this extension of working parents’ rights could result in a quarter of a million employees changing their working hours.

Furthermore “the proposed amendments to current legislation are likely to cause all employers genuine concern and could result in the incorporation of innovative new work patterns in the workplace to manage such requests”.

Academic research has established beyond all doubt that one thing that the majority of older workers are interested in is flexible working. So in the light of the current economic difficulties being faced by all businesses why doesn’t the government take an instant decision to move things along and extend the right to request flexible working to everyone?

Yes increased flexible working will cause initial disruption and teething problems for employers but it can be made workable. Research has also shown older workers to be the most trustworthy, reliable and committed age group of workers. Throwing them into the flexible working system would add to the gains to be made from a system which employers are going to have to implement whether they want to or not.

A silver lining?

If anything good comes from the current recession – and we can only hope that it does – it may be that progress is made on addressing two long-standing workplace problems. First is the issue of the recruitment of over 50s into meaningful, valuable, mainstream jobs i.e. the range of career positions we’ve been used to as opposed to a “little job” at Sainsburys, or B&Q. Second is the desire of just about all workers at all ages to have better work-life balance and improved flexibility about where, when and how much we work.

For years, numerous academic, government and commercial researchers have come out with reports showing that a) this is definitely what people want and b) it generally just isn’t happening. Of course, it’s easy to see why employers have dragged their heels. Why change things when they don’t have to (i.e. if it ain’t broke – and from their point of view it isn’t – why invest time and effort in fixing it)?

Interesting then to see how quickly employers can move when the need to save money becomes immediate and pressing. Part-time working, sabbaticals, reduced hours and home working, and more besides, are suddenly all being introduced by employers anxious not to make staff redundant.

On a longer term basis let’s hope that this pressure to review their business needs on a more in-depth basis will see more employers realizing that it is the quality of individual employees in terms of their skills, knowledge, experience and wisdom that they should be judging rather than the meaningless criterion of chronological age.

Ageism is still the most pervasive and invidious form of discrimination in our society. Let’s hope that the recession leads to some real steps forward in terms of changing attitudes and practices.