22 November 2011
ILC-UK report on the barriers to ‘gradual retirement’ and ‘extended working lives’ in the pensions system.
It is too often assumed that retirement is a one-off event, rather than a process. Yet there is increasing evidence that we are moving towards a process of ‘gradual retirement’, a concept associated with a wide range of opportunities that may be available to older workers, including downshifting within their current employment, moving into new forms of flexible and part-time work, and self-employment.
Crucially, a process of gradual retirement is far more likely to result in later retirements. However, it is clear that many barriers to gradual retirement remain. This report, which has been kindly supported by Aviva, examines barriers contained within pensions provision. It is based on a survey commissioned by ILC-UK in September 2011, and a roundtable debate held in the House of Commons in October 2011.
The key findings of the survey are:
• 40 per cent of people would consider delaying their retirement if they could defer the state pension in return for higher payments later – yet 59 per cent are unaware that this option is already available.
• 42 per cent of people would consider delaying their retirement if they could combine income from an occupational pension and their current job – yet 66 per cent are unaware that this option is already available to many employees.
• 46 per cent of people would consider delaying their retirement if their employer offered greater support for reducing their working hours, or flexible working arrangements.
• A lower proportion of people, 36 per cent, would consider delaying their retirement if the state pension age is increased further than already planned. However, this proportion rises to 53 per cent among part-time workers, underlining the importance of ‘gradual retirement’.
• 55 per cent of people would support a system whereby individuals could access part of their state pension early, in return for a lower pension when they retire in full.
• A large majority of people – 67 per cent – do not support the idea that people above state pension age, yet still in employment, should continue to pay National Insurance contributions.
The report recommends that the government should:
1. Make the positive case for extending working lives much more strongly. At present, many people feel that raising the state pension age is simply about deficit reduction. Many older people recognise the benefits of staying in work for longer, but nevertheless perceive the government’s current strategy as a threat to their hard-earned entitlements.
2. Consider the introduction of a ‘graduated state pension’. ILC-UK’s survey reveals strong support for a system whereby individuals wanting to downshift could access part of their state pension – even if they would therefore receive lower pension payments when they retire in full.
3. Better promote aspects of the pensions system that encourage longer working lives. This applies, in particular, to state pension deferral. It seems many people would stay in work if they could defer their state pension, but are unaware that this option already exists.
Author: Craig Berry
A copy of the policy brief can be downloaded below: