The ONS tells us that nearly a third of the UK workforce is over the age of 50, up from 20 per cent just 30 years ago. The workforce is getting older. People are getting older. We’re all going to work for longer.
In the words of Dr Anna Dixon of the Centre for Ageing Better, employers need to recognise the value of their growing older workforce. Years ago, I used to conduct retirement advice interviews in the workplace. I remember one such meeting with a man who was coming up to 65. He had made little provision for his retirement and was reluctant to talk about his plans or to even think about planning. I wasn’t getting through and I asked him why he was so reluctant to prepare for his retirement. He thought for a moment and said, ”I just don’t want to get old.“ That was a light bulb moment for me. Many of us simply don’t want to retire – we want to continue to add value, and to feel valued.
Gallup’s annual State of the Global Workforce report surveys motivations and behaviours of millions of workers across 150 countries. It tells us that, as we get older, we’re less concerned with status and promotion, and more concerned with job satisfaction, autonomy and working flexibility. So while many of us want or have to work longer, we want to do so on our own terms. We are going to see more career changes later in life. We’re going to see more people going part-time.
But there is a growing disconnect between our working patterns and our savings patterns, raising the question, will our long-term savings provision support these changes in the way we work later in life? Unlike its predecessor defined benefit, defined contribution is now only solving part of the retirement problem. The ONS tells us that the median pot size for people aged between 55 and 64 is £180K. Stretching that out for 25 or even 30 years will make for a somewhat Spartan lifestyle to say the least. Most of us will outlive our pensions.
So you’d think we’d be more careful with our money. But the reality is quite the opposite. According to the ONS, pension freedoms have seen us accessing our money earlier, encashing more readily and then drawing at unsustainable rates. Paradoxically, these ‘freedoms’ are likely to have a negative impact upon our freedom to do what we want in later life.
So why should employers care? Gallup categorises workers as engaged, not engaged or actively disengaged. It reveals that only 20 per cent of our global workforce is engaged. In the UK, it’s only 11 per cent. Significantly this dips yet further for older workers. Those workers whose needs aren’t met become less and less engaged over time, having a clear and direct impact on their productivity.
Gallup tells us that those organisations with ‘high employee engagement achieve higher productivity, higher customer loyalty, better safety, lower turnover and higher profitability’.
It’s going to be in the interests of organisations to support their workers in using their assets effectively. To optimise their finances such that they can create that work-life balance that offers the flexibility and autonomy that we know maintains productivity.
What actions should businesses be taking? An obvious strategy is to help workers make better decisions in the lead up to, at, and even after, retirement.
Many workers over 55 will move to an ‘active/passive’ income model – partly from paid employment, partly from accessing pension savings. Doing more with what we have, seeing the big picture, looking at financial plans holistically, all will help workers optimise their, increasingly protracted, transitions into retirement.
Businesses that can offer their employees access to advice and guidance that addresses plans holistically are likely to be catalysing better decisions and more optimistic prospects. Businesses should plan for many more part-time workers, over the age of 55. Giving them access to the right resources and advice will be key to keeping these people happy and productive. Creating good decisions at retirement will have a profound impact on engagement and productivity.
Business leaders need to ask themselves whether their organisation is ready for more part-time workers, ready for more phased retirements and ready to support the decision-making that will make these new working models a success.