Intense exercise, prescription medication, a diet high in sugar – all things we shouldn’t stop suddenly, but rather ease into, and reduce gradually, giving ourselves a chance to become accustomed, physically, mentally and emotionally. It can be argued, and has been argued, that the same applies to our working lives.
Termed as the ‘cliff edge’, it vividly describes a person’s choice to suddenly stop work altogether, to enter retirement. However, for many employees fortunate to approach retirement (and not have it thrust upon them due to sudden ill health, physical limitations or outside commitments), the thought of coming to an immediate stop, in the traditional way, is proving to be far less appealing.
This post serves as part 2 of our Pensions & Retirement series, and focuses on how employers can support older employees on their road to retirement, while also making the best moves for their company.
Retire Now VS Do It Later?
In the not-so-distant past, men were expected to retire at age 65, and women at age 60. These ages were based on when men and women became eligible to draw their state pensions – one issue being that this expectation was applied regardless of how well you worked or how much more you had to offer.
Fast forward to 1995 when The Pensions Act provided for the State Pension age for women to increase from 60 to 65 (this is being staggered depending on the date of birth). Fast forward again to the present day and state pension ages for all are continuing to rise, mandatory retirement ages have been abolished and the expectation that we will work for more years has been set.
In a survey conducted by insurance company Aegon in conjunction with Opinium in 2018, it was found that half of UK workers would rather work longer and gradually retire, than face the ‘cliff edge’ style of traditional retirement – suddenly stopping work altogether. The survey polled 1007 employees aged over 50 and earning more than £20,000;
● 49% stated they would like a reduced workload in their progression towards retirement;
● 70% stated that they would like to work fewer days each week;
● 44% stated they would like to work fewer hours each day; and
● Only 31% had the desire to retire in the traditional way.
The idea of a ‘pre-retirement’ period is highly favoured by a generation wishing to progress into retirement in an active, healthy, manageable and balanced manner, and involves reducing hours, reducing the pace of work, and allowing flexibility to handle external responsibilities that come to many in later life, such as caring for partners, elderly parents and grandchildren. But the onus is on employers to help make this possible.
If that is not inspiration enough, insurance firm Aviva recently estimated that the UK could see a shortfall in workers of up to 3 million within the next 10 years, occurring from a failure to support and retain older workers, as the percentage of the population in later-life increases. Plus, we do have to be prepared for the possibility of Brexit removing some talent from the UK economy?
So, What Can Employers Do?
Make your employees aware of the options you are able to consider when it comes to ‘flexible retirement’ and do whatever is practicably possible within your workplace to support them in taking this option. If you do not offer the support of an independent pension advisor, you can guide them towards the ‘Pension Wise’ website that offers free and impartial Government guidance for over 50’s with a private or workplace pension.
From age 55, an employee can reduce their hours or transfer to a less senior position (with your agreement), while drawing some or all of their non-state pension benefits. Flexible retirement, combined with changes to the tax regime for pensions, also means that many people can draw a lump sum from their non-state pension pots at an earlier stage, presenting your employees with the opportunity to glide more easily into retirement, without sacrificing their skills, social connections or financial security.
As an employer, ways in which you can support employees in taking flexible retirement include; provide opportunities to move to different roles, or to part-time, or to partially working from home; reducing workloads, improve working conditions and environments for optimum health, and; offer training roles where older employees impart their knowledge onto their younger counterparts.
Is It Worth Doing?
Here are 7 benefits to providing a great flexible retirement option to your employees:
● Experienced, knowledgeable and competent staff are retained for longer;
● Employees enjoy a prolonged income and sense of financial security;
● Employees’ overall wellbeing is increased through a sense of control of their future;
● Older employees can help develop younger workers in their roles;
● Employees continue to thrive mentally and socially from extended time in the workplace;
● Individuals with caring responsibilities (elderly relatives or grandchildren) can balance commitments, inspiring more loyalty and retention; and
● Fewer costs for training new staff, as less need to recruit new talent and skills.
Making flexible retirement arrangements are subject to the consent of the employee, employer and the pension provider, but are worth entertaining for the ongoing success of your company, the continued loyalty of your employees, and a strong future for the UK economy.
Do you have a policy on flexible retirement? Is it something you can make a successful reality for your employees?