Moneybox advises on saving money for retirement
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Fewer older people are in work than before the COVID-19 pandemic, with more than half of retired people believing they could get a paid job if they tried. Women have been particularly impacted by a lack of confidence in their ability to find work.
More than half (55 percent) of retired people aged 55 and over did not believe they would be able to find a paid job and only one in five (20 percent) who would like to work were confident they would be able to find paid employment, according to research from Just Group.
Although many retired people felt they would struggle to find work, women appear to be the worst affected. According to the study, female retirees were less confident than men they would be able to find paid employment, at just 13 percent compared to 26 percent.
The bleak outlook, particularly for women, is reflected in today’s official labour market statistics for the three months to August 2021 that show the effect on older workers of the coronavirus pandemic.
There has been a fall of 89,000 workers aged 65 and over compared to the first three months of 2020. This is a percentage fall in employment of nearly 6.3 percent, nearly four times the rate seen in the 16-64 age group.
In addition to this, there were 283,000 more ‘inactive’ over 65s since the pandemic – mostly retired – and nearly seven in 10 were women.
Stephen Lowe, group communications director at Just Group commented: “With state pension age having risen to 66 you would expect to see a rise in the numbers of over-65s working but that has stalled through the pandemic.
“The number of employed men aged 65 and over has now crept above pre-pandemic levels but this has been more than offset by the fall in the number of working women aged 65 and over where there has been a 106,000 or 17 percent fall in numbers.
“If working later in life is going to be viable, it is important that older groups are given the opportunities and support they need to stay in work.”
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Many people look to continue working even past state pension age in order to provide more income after they eventually decide to stop working. Part of the reason for this could be that the state pension does not appear to be enough to live on for the average pensioner.
The amount of state pension one can receive varies depending on whether someone qualifies for the new or basic state pension, but the full new state pension is currently worth £179.60 each week, or £9,339.20 per year.
The full basic state pension on the other hand is worth £137.60 a week, which means a pensioner receiving this would pick up £7,155.20 per year. However, even by receiving the maximum amount of state pension, retirees are likely to need additional private pension savings as well.
Just Group revealed that the point in 2021 at which the average retired couple would have exhausted their state pension income was August 31, leaving them four months short of being able to live off the state pension alone.
Two full state pensions are equal to approximately £18,680 a year, with official figures showing the average annual spend for a two-person retired household to be £28,064, leaving a shortfall of £9,384 for the year.
Pensioners would therefore need to find a way to bridge the gap using other income sources, such as private pensions or other savings and investments, with many people choosing to work past retirement age in order to earn extra money.
Single pensioners who receive the full state pension receive just under £9,340 per year, but spend an average of £13,842 per year, meaning they also do not have enough state pension to live on. This shortfall of £4,502 means they would have spent the equivalent of their yearly state pension by September 3.
Auto-enrolment is one helpful way that Britons have been able to easily contribute to their pension pot, but doing so at the minimum contribution level is also not believed to be enough to build up sufficient retirement savings.
The trade body Equity Release Council found the level of contributions required as a minimum by auto-enrolment is not enough to provide a comfortable retirement. They claim paying in the minimum allowed under auto-enrolment for 40 years would leave the average saver with just 15 percent of their final salary in retirement.
Workplace pensions such as auto-enrolment are beneficial for employees because one’s employer will also contribute to their pension, but even adding this extra amount does not leave enough of a mark.
The worker is normally expected to put five percent of their salary towards their pension, which includes tax relief from the Government, with their employer then adding a further three percent on top.
For the 2021/22 tax year, the minimum contributions apply to ‘qualifying earnings’ over £6,240 and up to a ceiling of £50,270. This means someone earning £25,000 each year would pay auto-enrolment pension contributions based on £18,760. Therefore, a combined contribution of eight towards one’s pension between employee and employer would mean only £1,500 going towards one’s retirement savings each year.
With many retirees struggling to make ends meet after reaching retirement age, it is vital that older people have the option to continue working if they feel they need to, but based on Just Group’s research, it appears many are finding fewer opportunities to work at an older age.
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