Why older people will need to work longer
The population is ageing, and the trend will continue. David Adams looks at why more older people will need to work for longer and what this means for them, their employers, the economy and society.
Unlike racism and sexism, ageism in the UK too often seems to go unnoticed, whether enshrined in policy or more subtly through assumptions about the relative wealth or voting habits of pensioners.
An example of how ageism manifested itself in UK government policy was the mandatory retirement age of 65. This was abolished in 2011, a change prompted by demographic trends. Life expectancy in the UK will have risen from 78.3 years for men and 82.3 for women in 2010 to 82.47 and 85.25 in 2030, according to Imperial College London and the World Health Organisation.
If those trends continue they will place a huge strain on the NHS, on social care, and on pensions and benefits systems. There is a clear need to maximise economic output and taxation income, to support an ageing society. More older people will need to work for longer.
The government’s Fuller Working Lives strategy, the latest step in a series of policy changes designed to increase employment among older people, was launched in February by the government’s business champion for older workers, Andy Briggs, chief executive of UK Life at Aviva.
UK employers are being asked to take on a further 1 million workers aged between 50 and 69 during the next five years. The government believes that if employment among 50- to 64-year-olds matched that of people aged 35 to 49, GDP would increase by 5%.
ICAEW welcomes the initiative. “It will make a difference,” says Clive Lewis, head of enterprise at ICAEW, who works part-time for the Institute at the age of 70 while running his own accountancy practice. “It’s not just government encouraging employers, it’s also encouraging people to get into the mindset of thinking they should work beyond normal retirement age.”
There are a number of reasons why working for longer could be good for people. There is plenty of evidence to suggest that retirement – particularly if it takes the form of a sudden departure from work – can be bad for physical and mental health.
Working longer can also significantly increase lifetime earnings and retirement income. This may be more of a preoccupation for those approaching retirement over the next 20 years: as more relatively generous final salary Defined Benefit pension schemes have closed to future accrual and been replaced by schemes that usually produce smaller pensions, more people may feel they have to keep working for as long as possible.
Factors that reduce retirement income also have a disproportionate effect on women, says Yvonne Sonsino, innovation leader and partner at Mercer and the author of The New Rules of Living Longer: How to Survive Your Longer Life. “Women live longer, tend to be paid less, are more likely to work part-time and more likely to have career gaps,” she explains. “As a result, the value of their pensions may be reduced by 40% compared to a man doing the same job.”
A growing number of people may also want to change the way they work in order to meet commitments as carers. The Employers for Carers group provides information, support and case study examples of employers that have adapted working conditions to help carers among their staff. For example, the Chelsea and Westminster NHS Trust has introduced additional flexible working arrangements and now offers up to five days of emergency leave to care for dependents.
Ageism among employers may still be a problem. At present, more than eight out of 10 (83%) workers aged 50 or over believe there are fewer employment opportunities available to them than to younger people, according to a survey conducted by Aviva. Yet 88% felt they had more to offer in the workplace than their younger colleagues.
They may be right – UK government research from 2015 lists benefits most commonly cited by employers of older people: experience (cited by over 75%); reliability (65%); and older workers acting as mentors (54%). There is also a strong argument that employers need to gain a better understanding of older people in order to help them serve and appeal to more senior members of their customer base – usually the fastest growing group within it.
Although an increasing number of UK employers are improving the way they deal with older members of the workforce, research from PwC suggests the UK is lagging behind a number of other countries in this respect. Its Golden Age Index uses indicators including employment, earnings and training for the over 55s to compare conditions for older workers in 34 OECD countries. The UK is currently ranked 18th.
Comparing the UK with countries that have very different labour market dynamics may not always be helpful, but John Hawksworth, chief economist at PwC, believes a comparison with Sweden, third in the index behind Iceland and New Zealand, could be.
PwC calculates that if the employment of over 55s in the UK matched that seen in Sweden, UK GDP would be boosted by 5.8%. In Sweden 66% of 55- to 64-year-olds are in full-time employment, compared to 51% in the UK; and 11% of Swedes aged 65 and over work, compared to 7% in the UK. Policies used by the Swedish government to encourage employment of older workers include generous in-work tax credits and exemption from social security contributions for workers aged 65 and over; and tax incentives for businesses employing older people.
There have also been some impressive results achieved by individual employers adapting working practices in other European countries. In Germany, BMW altered working conditions and technologies used on its production line to benefit older workers, then saw productivity increase by 7%, while defect rates fell to just above zero and absence rates to 2%.
Best practice should also include continuing to offer older workers training and development opportunities. This is another area where many UK employers are failing at present. “Older people in the workforce are receiving less benefit from opportunities to enhance and update their skills,” says Professor Tom Kirkwood, New-castle University’s associate dean for ageing and an expert on the science of ageing. “But there is no good reason why an older person is incapable of receiving productive training and skills development.”
Nor should health issues prevent people working for longer. Clearly some jobs are more physical than others – think of construction, some manufacturing jobs, cleaning, or nursing. “In some sectors you do see retirement correlated with increased age, often as a result of problems like back pain, or joint problems,” says Patrick Thomson, senior programme manager at the think tank and campaigning organisation The Centre for Ageing Better. “But if preventative steps are taken to address those problems there’s no reason why that has to be the case: you can keep people in a job for much longer, or they can move into other roles.”
Older workers are no more likely than their younger colleagues to be absent through illness. Gareth Headley, director at HR consultancy The Clear Company, acknowledges that some older people will become more susceptible to long-term health problems. But he argues that minor changes at work will allow employers to support people with long-term health conditions – even those suffering from the early symptoms of dementia.
Small changes to working hours, practices or facilities will enable these people to keep working for months or years, argues Headley, benefiting them, their employers and – because it may help to slow their decline – NHS and social care resources.
“The longer you’re in a job where you’re respected and valued, the longer you will be well – and the longer you’ll be paying taxes,” claims Rachael Saunders, director of the Age at Work campaign for Business in the Community, which is working with the government on the Fuller Lives strategy.
In future more employees may also benefit from accessing an alternative to the old “cliff edge” form of retirement: a phased retirement, including part-time work and perhaps some unpaid holiday.
“If older people can work part-time for a few years before retirement they have a better work-life balance, and employers retain skilled and experienced staff for longer,” says the government’s previous business champion for older workers, former pensions minister Baroness Ros Altmann. UK employers adopting this approach include Marks & Spencer, where employees can draw their pension from the age of 55 and gradually reduce the number of hours they work.
“The longer people are able to work, the higher their lifetime income, the better their pension prospects and the stronger the economy will be,” says Altmann. And even the most sceptical employers should note that they will have little choice in this matter anyway. Society is ageing; and people in the UK and other developed countries will have to put their trust in the age and wisdom of their elders.
Employers doing more to help older workers
“Older workers fulfil roles right across the organisation including legal and compliance, treasury, strategy and planning, marketing, HR and many customer facing roles,” says Amanda Rice, head of equality, diversity and inclusion at Nationwide Building Society. “By actively recruiting from diverse sectors of society we will attract and retain talented people who reflect the interests of our members and the communities in which we operate. Everybody is entitled to stay in employment on the same terms and conditions, and benefits such as private health insurance remain in place. Our internal carers’ network helps address some caring responsibilities that older workers often have.”
Stoke-on-Trent-based ceramics manufacturer Steelite has enjoyed business benefits from focusing continuous training and lifelong learning efforts on the over 50s, investing in occupational health and assistive technologies. It has also removed upper age limits from apprenticeships and graduate programmes; and introduced flexible working and phased retirement.
Nearly four out of 10 (38%) of employees at Marks & Spencer are aged 50 and over, including 12% aged over 60 and 4% over 65. “We see the value in having a diverse workforce, which reflects the broad nature of our customer base,” says Claire Maydew, diversity and inclusion manager at Marks & Spencer. “We have a network that focuses on employees with health conditions, ensuring specific needs are met.
We also encourage employees to continue developing their skills through their career.”
More older workers in the accountancy sector?
How might accountancy be affected by an increase in employment among older people? ICAEW’s Clive Lewis notes that this is one sector where some older people, particularly those at senior level, find it harder to give up work: many readers will know of partners in smaller firms across the country who have continued working well beyond the age of 65. If accountancy is among those sectors to suffer from skills shortages in future, more accountants may be encouraged to follow their lead.
Lewis also regrets the loss to the profession of individuals who may have worked in larger accountancy firms or other large organisations and then taken early retirement.
“Often they have a wealth of experience that they could use for commercial gain, or to assist charities and other organisations,” he says – acknowledging that many do indeed become treasurers or work in other capacities for voluntary sector organisations.
Originally published in Economia, May 2017.