PRIME Initiative

Over the next 20 years the UK’s population will age faster than ever before in its history. There will be 5.4 million more people of pension age - an increase of 45 per cent. At the same time, our working-age ratio is declining. This combination has serious implications for the economy, with proportionally fewer workers supporting the growing number of older retired people.

One measure being implemented by Government from next year to tackle this issue is the introduction of later retirement ages. Through gradual changes in State Pension age (SPA), three million people who would otherwise be able to claim a state pension are being nudged rather hopefully back into the workforce.

This presentation given by PRIME recently (Powerpoint format) highlights the economic impact of these changes - and projects even higher levels of worklessness and poverty among older people if practical measures are not adopted now.

Of the three million workers eventually being removed from pension entitlement by the changes, most are women - in fact in the initial batch all are. We reckon that no more than 40 per cent of the total are likely to be economically active. This means that 60 per cent of the three million will be without a pension - and without a job. And that’s without taking into consideration the impact of the recession, since it’s impossible to say how long that will last.

But it does seem the consequences of changing the pension age haven’t really been thought through. In attempting to solve the problem of financing pension provision the state may only have succeeded in creating different problems elsewhere.

On the plus side, today around one fifth of the over-50 working population are self-employed, and many continuing to work beyond the current state pension age. So there is considerable benefit to the economy to be gained through assisting higher numbers of over 50s into self-employment.

But self-employment isn’t an option for everyone, so there would also need to be other measures to support older workers to remain in or re-enter conventional employment.

Without such action raising the state pension age won’t accomplish much - indeed it may do more harm than good. It’s not enough to put a whole lot of older women and men back into the workforce by administrative fiat. They also need some practical way of making a living.

See also What are the alternatives to a personal pension? on our other site.

It’s widely recognised that our population is ageing, the main cause being the post-war baby-boom.

According to figures released by the Office for National Statistics last year (see ref 1), between 2006 and 2031, the overall population of England is set to rise from 50.76 million to 60.43m, a rise of 19.1 per cent.

However, the number of people of pension age is projected to increase by a much higher rate than this; over this same period, the number of women aged over 60, and men aged over 65 (ie current retirement age) is set to rise from 9.46m to 14.96m - a rise of 58 per cent.

Naturally, authorities are extremely concerned by the increasing costs of supporting older people, particularly pensions, healthcare, social services and housing.

Government is taking measures to tackle this challenge, including a gradual increase in pension age, which starts next year, the biggest impact being for women’s retirement ages.

For a man or woman aged 30 on 1st March this year, they will both work for longer, and will be aged 68 when they reach State Pension Age; however, for a woman who reaches her 50th birthday on 1st March this year, she would be aged 65 before she can draw her State Pension, whereas for a man of the same age, there is no change.

You can get your own projection here. 

These changes in State Pension Age will have a big impact on our working age population; this is currently women aged 16 to 59, and men aged 16 to 64. Pension Age changes across England will bring 2.53 million people into the working age population, who, without these changes, would be retired.

So what support is needed to help older people remain in work? We know that currently, 28 per cent of those aged 50 to State Pension Age are out of work, compared with just 20 per cent of those aged under 50 (see ref 2 below). We also know that employment rates drop off sharply the closer people get to retirement age (see ref 3).

This is why PRIME, a national charity founded by Prince Charles in 1999, helps people look at self-employment as a way of continuing to earn, and remain economically active. Self-employment rates are much higher for the over 50s than their younger counterparts, with around one in five (18 per cent ) working in this way, compared with 11 per cent for the under 50s.

The over 50s also appear to have much better business survival rates than younger people (ref 4), so with careful research and planning, this could be an option that gives people more control over their working lives, and the choice of retiring when they want.

We know from the people we talk to daily that many are looking for more flexible solutions than they can find on offer through traditional employment, and that’s assuming they can even find job opportunities. A lot of people over 50 have care responsibilities for both elderly parents and grandchildren; many have health conditions that require a change in working patterns, and some only want to work part-time.

In today’s economic climate, with rising unemployment, redundancies continually in the headlines, and less jobs on offer, people do need to consider different options, and that’s where organisations like PRIME come in. We are very aware of the challenges self-employment presents, particularly to someone who has spent all their life as an employee, and often in the same organisation.

There’s a lot of help and information on this website , but if you can’t find what you’re looking for call us on 0800 783 1904.

References 

1 ONS, 2006-based subnational population projections by broad age-groups and old age dependency ratios.

2 Annual Population Survey, ONS, Jul 2007-Jun 2008

3 Nigel Campbell, “Decline of Employment Among Older People in Britain”,
Centre for Analysis of Social Exclusion, 1999

4 Cressy and Storey (1995) show survival rates after six years amounted to 70% for businesses with owner/managers over 55, while the average rate for all start-ups was only 19%.

5. Findings from: The Economic Impact of Ageing on Entrepreneurship and SMEs by M. Peters, R. Cressy, D. Storey May 1999. Warwick Business School. Study initiated and financed by the Forward Studies Unit of the European Commission.

Today’s unemployment figures released by the Office for National Statistics paint a worrying picture for those aged over 50.

In the last year (Dec 2007 to Dec 2008), as highlighted by the national media, unemployment in the UK has risen from 1.6m to 1.97m - an increase of 370,000 people.

This increase is made up of 296,000 under 50s and 74,000 over 50s. What’s particularly worrying for the over 50s is that the increase is 31.5 per cent, against just 21.6 per cent for younger working-age people.

This now means that of all unemployed people, the number aged over 50 now represents 15.5 per cent of the total, as against 14.5 per cent a year ago. What’s more, once on Jobseekers Allowance, younger people tend to get back into work quicker than the over 50s, resulting in a higher proportion of older people becoming long-term unemployed.

It’s interesting to note that employment figures have seen an increase of 86,000 from those who are of pension age, 50,000 of whom are women. Is this an indication that more older people want to, and are capable of, work beyond our current State Pensions ages? Or is it through necessity, with devalued pension funds, badly performing savings, and inadequate State Pensions?

Nationally, around 20 per cent of working over 50s are self-employed, and benefit from better business survival rates than younger people, mainly through life experience and better planning & research.

So this can sometimes be a solution to continuing to work in today’s economic climate, and achieving the flexibility to fit around other commitments.

This video on the BBC web site is about people over 50 in the South West setting up their own businesses. It was shown on Spotlight, the BBC’s regional news programme for the South West of England, on the 23rd of October 2008.

The clip shows interviews with Jean Singleton and Carol Glover who set up Jeneca Beads, and also an interview with me, Peter Bennie of PRIME. We were filmed as part of the coverage of the well-attended HMRC business advice day held in Torquay the same day  Jean and Carol were filmed back at their base, after having earlier spoken at a PRIME seminar at the same event.

PRIME regularly attends the HMRC events with a stand, as they are a cost effective way of making contact with people around the UK. We have another one coming up soon in Belfast, where we’ll also be running our own programme of workshops late into the evening, after the HMRC exhibition has finished.