Working beyond retirement

Posted in: Finance Last updated: 17 Jul 2014

Working beyond retirement is ever more likely for today’s generation of over 50s – but have previous generations been here before?

Looking back to the 1950's

Increasing numbers of people are either staying in employment after their retirement date or returning to work. Some say it is driven by financial need. To others it’s a liberating experience, made possible by laws against age discrimination. All, however, agree that it is a recent development. But is it? We go back to the 50s to find out.

To have been “in your 50s in the 1950s” was to be coasting towards a pre-determined date with retirement and all that went with it in terms of pension, leisure and the fabled rose bushes on the cards for those who had said a final farewell to the world of work.

What a contrast with today, when the number of people working beyond normal retirement age creeps up year by year as they seek to make ends meet. Today’s over 50s generation seems forever to be hearing that “we” – i.e. they – are going to have to work for longer.

Is all this true? And what does the answer to that question mean to us today – both financially and socially?

The short answer is that this rose-tinted view of retirement, 1950s-style, is hopelessly inaccurate. A far higher proportion of male workers still toiled past the State Pension age in the early Fifties. Far from pocketing the fruits of the Beveridge Report and taking it easy, many men were still hard at it.

In other words, if ever there were a “golden age” of clocking off for good in one’s early to mid-60s, we are closer to it now than we were then. Only very recently has the total number of people working beyond retirement age stopped falling and started, modestly, to increase.

What does that mean in financial terms to us today? Well, it may go some way to explaining the strain experienced by many retired people. Living longer than their 1950s counterparts and retiring earlier is a recipe for spreading more thinly the available retirement funds. A lesson perhaps in the growing need to start saving for retirement as early as possible.

Later-life working – then and now

What were the impacts of that very different working scene and what do they mean for us today? Let’s look first at the scale of the difference between both then and now and between our view of the Fifties and the reality.

Professor John Macnicol of the London School of Economics notes: “In the early Fifties, two-thirds of men worked past the State Pension age of 65…in 2010 two-thirds had left work by age 64.”

He goes on to point out that this formed part of a longer decline in working in later life, a decline that has only recently showed signs of reversing.

An obvious financial impact of later-life working in the 1950s would have been felt in the much reduced reliance of older workers on the State Pension, or on any other scheme into which they had been enrolled. With such a proportion of them still taking home a pay packet, their pensions would have assumed a smaller share of family budgets

This is relevant to us in our own time, as in the last few years the previous trend towards earlier retirement has been partially reversed, with increasing numbers working in later life – albeit not yet on anything like the scale of the past. The total number of people past retirement age who are still in work has topped the million mark, from 891,000 in figures released in May 2012 to 1.09 million in the equivalent figures this year.

From those later-life workers of the 1950s, we can learn the perhaps-uncomfortable lesson that the existence of post-retirement pay packets may relieve the pressure on society at large to find the money for generous pensions.

By 1960, the State Pension had crept up to £2 10s (£2.50) a week, a less-than-generous £50 in today’s money. The Coalition’s flat-rate pension is expected to be about £144 a week. True, there are more things we may wish to buy in retirement now than then. But the fact is that the State Pension has greatly increased in value since the end of the 1950s.

Will that continue? The sight of more and more people working – and earning – past retirement age may tempt Ministers to weaken the link between pension rises and the inflation rate, given the lessened reliance on the State Pension in later life.

Another parallel with the present is that the social impact of very many more older workers would have been not only a widespread acceptance of later-life employment but also a very much weaker notion of “retirement” as a separate stage in life, a time for holidays, hobbies and relaxation and, with it, a much smaller “retirement industry” catering to such notions of later-life

Similarly, we hear claims today that the notion of a single retirement age followed by a standard pensioner lifestyle is out of date, such as in a recent report by the charity Age UK [2]. Our 1950s forebears were, it seems, there before us in terms of dealing with later life on their own terms and, when they wished, working well into older age.

Similarities, yes – but two big differences as well

There are, however, two very significant ways in which then was different from now. Then, as Professor Macnicol points out, later-life working was concentrated in certain industry sectors: “The ‘oldest’ workforces are to be found in agriculture and fishing, manufacturing, construction [and] transport.” As employment levels in these areas declined in the post-war era, so did later-life working.

This time, post-retirement age workers are to be found everywhere, from the boardroom to the supermarket floor.

The second big difference is longevity. Life expectancy for people born now is just over 80 years, about a decade longer than was the case in the Fifties. Today, the range of options for retirement saving is much wider, and yet all the evidence is that most people underestimate their likely lifespan and the amount of money they will need.

So while later-life employment patterns are closer to those of the Fifties than may have been thought, later life itself is likely to go on for considerably longer. Inevitably, that will push the active working age further out, given the likelihood that those currently in their 50s will need to supplement income from their retirement savings.

Perhaps in recognition of this, Pensions Minister Steve Webb published an action plan in June (“Fuller Working Lives”) to help older people to stay in the workplace, and is to appoint an “older workers’ employment champion” to keep their needs in front of policy-makers.

How their 1950s forebears managed without, we shall never know.

For today’s generation of fiftysomethings who don’t fancy working on and on perhaps the greatest lesson is the need for some prudent financial planning to make the money they are earning today last into a lot more tomorrows than their 1950s equivalents could expect.

1 ILC-UK (August 2010), “Ageism and Age Discrimination: Some analytical issues”, ILC-UK, August 2010
2 Age UK (June 2014), “Financial Resilience in Later Life”

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