The following article was first posted on 27 October
When I was young, retirement was something that happened at 65. After a lifetime of work as a coach maker, my grandfather retired and moved to North Wales with my Nan where they lived in a whitewashed bungalow, kept a very tidy garden and enjoyed a ‘quiet retirement’.
I was therefore surprised when my father retired ‘early’ at 61. His had been in a ‘job for life’ in local government with a generous final salary pension fund. So ‘early retirement’ was not a problem. He and my Mum travelled and visited Sue and I every year in Hong Kong.
We have since had friends take ‘early retirement’ as young as 51 thanks to final salary pensions.
The Oxford Dictionaries’ definition of ‘retirement’ is “The action or fact of leaving one’s job and ceasing to work”. And, despite reports of the death of retirement, many people who have worked in a job for most of their lives, particularly a single employer, still look forward to retirement. The action of ‘ceasing to work’ is appealing after so many years. The FCA’s ‘Financial Lives’ report notes that 86% of over 65’s consider themselves to be ‘retired’.
For years, it has been natural to think of retirement as happening at 65. Employers were able to force retirement at this age. And for men, this is when the State Pension was payable.
But this is changing. The default retirement age relied on by employers was scrapped by the government in 2011; the State Pension Age has been steadily rising for both men and women; and, according to the FCA, around 20% of people don’t wait for the State Pension but retire before the age of 65.
So, is it true that a ‘cliff-edge’ retirement is a thing of the past as reported by so many newspapers? And, why do so many members of Booming Lives say “I have no intention of retiring” (see Sue Tickner’s Booming Life below)?
In answer to the first question, I suspect there are three ‘D’s’ in the 21st century that will require a change in the way we view retirement:
the death of final salary pensions
the demise of a ‘job for life’
the delay in the decline of health
Most final salary pension funds are now closed. I suspect they will wind down more quickly than expected and, after a surge of transfers into personal pensions, employees will no longer be able to plan their retirement with the same certainty as before. The second ‘D’ is related to the first; as people move from job to job and then into self-employment (a growth area of the economy) they have less pension savings and therefore less confidence in making the move out of work. And the third ‘D’ means that people are physically able and willing to stay in the labour market for longer.
Retirement will be very different from that experienced by our parents and grandparents. For many more people it will involve a period of self-employment or part time work. The FCA found that 16% of 65 to 74 year olds are still working of whom 40% are self employed and 51% are employed part time. The age of retirement might be any time from age 55 to age 80 or beyond.
If you are in good health, do not have a final salary pension fund and/or have been self employed or worked for a large variety of employers in your career then the notion of ‘retirement’ will seem very alien. Even with sufficient pensions or savings, for some people, like Sue, life offers too many opportunities and exciting experiences to sit back and enjoy a ‘quiet retirement’.