A significant drop in the number of over 65s in employment between March and May 2020 has fuelled speculation that the COVID-19 pandemic has forced many people into early retirement, but experts fear many will retire on inadequate savings.
Recent figures released by the ONS last month revealed that the rate of employment overall dropped by 126,000 in the last quarter, the largest quarterly decrease since July-September 2011. The drop, the ONS said, was ‘mainly driven’ by lower numbers of over 65s currently in work, down by 76,000 to 1.31 million as well as lower numbers of men in employment as well as part-time workers.
The ONS said the figures showed ‘weakening employment rates’ although unemployment is not rising due to the amount of people currently on furlough but not currently looking for work. Those on furlough and those in self-employment but who have temporarily ceased employment still have a ‘reasonable expectation’ of returning to work, the ONS added.
However, writing in MoneyFacts, consumer finance expert Michelle Monck speculated that the end of the Coronavirus Job Retention scheme ‘could see’ older employees retiring early.
The potential rise in those seeking early retirement has therefore raised concerns among some industry experts around peoples’ ability to retire on adequate savings while highlighting the importance of financial planning for unforeseen circumstances.
“With people being forced into early retirement (or earlier than planned access of their pension fund) people are likely to be making decisions without full facts to hand and without considering the full range of options. This is a concern. Rushed decisions can often lead to poor outcomes, with the rise in pension scams a potential issue too. Employers can take steps to help this cohort offering access to retirement planning or pension workshops, providing communications and activity checklists to mitigate the risks for people and aid improved decision making.”
- Martin Parish, Head of Financial Wellbeing at Aon
In June, the Guardian warned of a ‘lost generation’ of people about to retire following research commissioned by Centre for Ageing Better, carried out by Ipsos Mori, which revealed that the pandemic would result in a generation of people retiring with poor physical and mental health and without adequate retirement funds.
The research revealed that nearly half of those in their 50s and 60s believe their financial situation will deteriorate over the next twelve months. Responding to the findings, Anna Dixon, chief executive at the Centre of Ageing Better described the figures as ‘deeply worrying’. She said: “If this generation continues to be an afterthought in the coronavirus recovery, we will see a lost generation entering retirement in poorer health and worse financial circumstances than those before them.”
“With earnings at risk combined with potentially reduced pension fund values due to volatile equity markets we know people are anxious about their finances and the resulting negative impact on one’s health. Often people treat their finances in silos so do not have an overarching comprehension of their financial position. With the rise in financial technology solutions providing people with aggregated insights of their financial world throughout their working lives we may start to see an improved confidence with money management.”
- Martin Paris, Head of Financial Wellbeing at Aon
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