Retirement recedes after millions see cash dwindle

THE number of workers planning to put off retiring until after the age of 66 has doubled over the past year as poor economic conditions force people to work for longer.

A new study has found that one in ten people now say they will have to postpone retirement until they are 66 to 70, to cope with the double whammy of increased living costs and the plummeting value of fixed-income pensions.

The report, by Baring Asset Management, also found that a further 12.8 million people – a third of non-retired British adults – are unable to say what age they hope to retire at, while 10 per cent say they have no plans to retire at all.

Older people have been particularly hard-hit by the rise in inflation due to their reliance on commodities such as fuel to heat the home, while many pensions are fixed or are not keeping up with the rising cost of living.

A separate investigation by Prudential has revealed that a pensioner retiring this year on a fixed income – one which does not increase with inflation – could lose 60 per cent of their spending power over the course of a 20-year retirement.

It also found that the average person retiring in 2011 expects an annual income of £16,600, but if that income remains fixed it will be worth a mere £6,700 in today’s money in 20 years’ time.

The Barings research found that more than a third of non-retired British adults intend to retire over the age of 61 – an 11 per cent rise on last year.

The number of people planning to retire in the younger age bracket – between 56 and 60 – has also steadily decreased year on year since the recession began. The figure fell from 31 per cent in 2008 to just 11 per cent this year, according to the survey of 1,589 workers.

Marino Valensise, chief investment officer at Barings, said: “We have seen the cost of living continue to rise, making retirement more expensive and resulting in many more people having to put retirement off.”

She added: “With increased longevity and people not saving enough, the working population of those aged 65 and over will inevitably continue to increase.

“It is crucial that people take financial advice well in advance of their anticipated retirement, assessing their investment portfolios, as this could make all the difference in the long run.”

Workers in Scotland, however, have more fixed retirement plans than their counterparts in the rest of the UK. And just 3 per cent of the Scottish workforce say they have no idea when they will give up their job, against 15 per cent in south-east England.

Industry experts warned that many older people have previously taken out loans in order to help younger family members to get on the housing ladder or fund them through university, but have now found that their pension payments will not be sufficient to make repayments.

Yvonne McDiarmid, chief executive of Money Advice Scotland, said: “People having to postpone their retirement is becoming a lot more commonplace, perhaps because they have taken on additional debt to help out family members, thinking they would be able to pay them off with a better lump sum payment [from their pension pot] than they are getting.”

She added that an increasing number of people working past the age of 60 would have a knock-on effect for the rest of the working population.

“There is a limit to how much people can tighten their belts to cope with the increased cost of living, so we are seeing a much higher number of people continuing to work for longer.”

“Although these people have very good reasons to do so … people staying in work for longer … means there are fewer jobs for the younger generation.

“Also, it means people who should be sitting back and enjoying their retirement are having to work instead.”

Age Concern spokesman Doug Anthoney said the charity welcomed the right for older people to choose when they retired, but warned many pensioners were living in poverty.

The default retirement age of 65 was scrapped by the UK government in April this year.

l More than half of workers do not know about key reforms being made to pensions next year, when staff will be enrolled automatically into workplace schemes, research has shown.

A poll showed less than a third of those aged 18-24 in private firms and the voluntary sector were aware of the changes, a survey by the Chartered Institute of Personnel and Development revealed. It described the changes as the biggest reform to pensions for a century.