8 May 2006

The employment rate for men and women employed between the age of 50 and the state pension age is 72% and 68% respectively. This compares to a rate of 74.5% for all age ranges and whilst not sizeably different, supports data showing that the employment rate for both men and women declines steadily from around the age 50 onwards with fewer than half of men over the age of 64 now in work.

Whilst many of those retiring post 50 do so out of choice, over a third of people aged between 50 and 69 in Britain who have retired feel issues such as poor health and a discriminatory culture within the workforce have forced them into early retirement. As one example, a recent Age Partnership Group survey found that training and career development activities remain skewed towards younger workers with only 17% of workers over 50 receiving training in the last 13 weeks compared to 29% of those aged below 50. This is potentially worrying given the increasing life expectancy rates which will actually require individuals to remain in the workplace longer.

Companies too may be eager to shed the +50s to make way for a new generation of management, especially in light of the incoming age discrimination legislation which 60% of those surveyed by the Employers Forum on Age believed will make the process of employee retirement more difficult. But employers should note the following considerations. Birth rates are rapidly declining which, coupled with the increase in life expectancy, means that the demographic makeup of the British workforce is changing. It will therefore be necessary for employers to retain older workers. Secondly, in their haste to remove senior management, employers may forget that many senior executives will have years of sector experience and have developed customer relationships that would be detrimental for a company to lose overnight. So what is the answer?

At present there is a notable deficit in the opportunities offered to older workers to adjust their working hours or terms of employment without the fear of prejudicing their pension or other entitlements. According to the HSBC Future of Retirement Study, in 6 out of 10 societies surveyed, the majority of respondents saw alternating work and leisure as an ideal later lifestyle and, whilst the circumstances and aspirations of the over 50s vary widely, it has been found that many older workers would welcome the opportunity to elect phased retirement.

Yet few employers have established arrangements such as shorter working weeks, flexible hours or the opportunity to try something new and the potential benefits could be numerous. Offering such a programme may entice older workers to commence a programme of retirement as research indicates that of those currently in phased retirement programmes 57% entered into the arrangement voluntarily. Phased retirement programmes may also prevent employers incurring liabilities under the new age legislation whilst enabling them to tap into years of experience and create positions through the ranks for younger managers. Further, such measures may well prevent senior managers opting for phased retirement offers with competitors and may go a long way to maintaining the competitiveness of the business. 42% of those currently in such programmes stated their reason for electing phased retirement was because they continued to enjoy their work and only 28% indicated that they needed the income.

Where such programmes are not offered, those who make the wrong decision to retire or are forced into sudden complete retirement, without proper planning, could find themselves in a difficult situation. Individuals between 25 and 49 are much more likely to find reemployment following redundancy than those aged over 50 whilst long term unemployment is much more common among older workers. This is all the more significant when considered that the main damage done to those who lose their job is after the six month mark with wage decreases of up to 14% compared to only 7% after three months of unemployment.

The support and advice available for those considering retirement or facing forced retirement also is poor. Almost two thirds of respondents to the HSBC Survey stated that they had begun to prepare for retirement but that most of this was restricted to reading up on the subject and discussions with family friends. Individuals are not just looking for advice on how to spend their time and what to do with their pension, although these too are important considerations, but according to survey results up to 70% are looking to find some form of alternative and perhaps part time employment to make ends meet.

So is there in fact a strong case on both sides of the fence for employers to implement and employees to accept programmes of flexible and mutually beneficial phased retirement?