Retirement increasingly means different things to different people. Some people retire at a cliff edge; some may leave their main job and start a second career; some are forced out of work due to ill-health or caring responsibilities; while some wind down their hours and may never completely stop working. In the 21st century, there is no longer a clear concept of what retirement means, and the social security system needs to reflect this.
Given the choice, most of us would want to decide how and when we move from work to our own, ideal version of retirement. Those with higher incomes, good quality jobs, decent retirement savings and a range of skills, may well have this choice, and can often choose to work flexibly, access their pension savings, or change careers, all of which can smooth the transition to retirement.
Those with lower incomes have fewer choices. They are more likely to be forced out of work due to poor health and then have to rely on means-tested benefits or draw on limited savings while waiting to receive their state pension.
While a stated aim of universal credit is to incentivise work, well-publicised problems bring into question whether it will meet this objective.
And once people reach state pension age there is very little incentive for anyone reliant on benefits like pension credit to undertake any paid work – for a single person just £5 a week in earnings is ignored, in most cases – a figure unchanged since 1988. This needs urgent reform.
There has rightly been a great deal of attention given to the impact of rising women’s state pension age, but less to the knock-on effect this has had for means-tested benefits. Whereas pension credit used to be available at age 60, the age of eligibility is rising in line with women’s state pension age, and so more and more people in their 60s are having to claim universal credit instead.
And from 15 May 2019, pensioners with a partner under state pension age (so-called ‘mixed age couples’) will not be able to claim pension credit if they need help from means-tested benefits to get by. Instead they will have to claim universal credit – a system never designed for pensioners.
So how could the situation be changed? Age UK believes there should be a dual approach – improved opportunities and support for those who are able to work in the decade before state pension age, and a more generous and flexible benefit system for those who cannot.
There is a very good case to allow a carefully defined group of people unable to work due to caring responsibilities or ill health, to receive their state pension early, maybe three years before state pension age.
Given the rising state pension age disproportionately affects disadvantaged groups who have lower than average life expectancies, we could also look at ways to provide less onerous conditions and more generous benefit levels for those approaching state pension age. This could be through modifying universal credit or by setting pension credit age at, say, five years lower than state pension age.
Critics might argue that any changes would encourage more people to leave work earlier, but we disagree. Many people who are working get far more out of their jobs than just the money – other aspects including personal fulfilment and the social side are just as important. And many who do leave work prior to state pension age would like to keep going, but are denied the opportunity, either because of their personal circumstances or because of age discrimination forcing them out.
Despite improvements brought about by legislation, age discrimination remains rife, with recent polling commissioned by Age UK finding that 35 per cent of over 55s had experienced age discrimination in the workplace. Clearly there is more for government and employers to do in tackling this, particularly as employers are increasingly likely to rely on older workers to meet their skills needs.
Carers are another group who warrant special attention within our social security system – the proportion of people who are carers for a disabled or older family member peaks between ages 50 to 70, directly impacting on people’s retirement plans. In reality, many people who quit work to care are unlikely to get back in, or will find it difficult to replicate their previous salary, and so protecting the future finances of this group – who sacrifice much to pick up the pieces of the broken social care system – is a must. Outcomes could, for example, be improved by the government providing credits into private pension accounts for people receiving carer’s allowance, similar to the existing system for the state pension.
For many people, the cliff edge of full-time work one day, to retirement the next is no longer the aim or the reality – our social security and other areas of public policy need to encourage rather than disincentivise a smoother transition, especially for more disadvantaged groups.
Pensioner poverty levels are much lower than they were a couple of decades ago, but worryingly have started to rise in recent years. There is a danger that this trend will continue unless people have the support they need to work and save for as long as possible and have access to a benefit system that better meets their needs if they are unable to work up to a rising state pension age.