Increasing numbers opt to retire early

Click to follow
The Independent Online
MORE and more people are taking early retirement, despite the combined effects of the tight jobs market and ageing population, according to a new report. About four out of five employees retiring from big companies did so before reaching the official retirement age.

Early retirement has been widely used as a relatively painless way of shedding labour for more than a decade. But increased awareness of a mounting pensions burden as the average age of the population rises means the new report*, from Incomes Data Services (IDS), will cause some concern.

Only last week the Organisation for Economic Co-operation and Development (OECD) published a report calling on governments to encourage "active ageing" - including discouraging early retirement. Its experts are concerned the tax system in many countries makes stopping work below normal retirement age too attractive.

The IDS report, in its latest "Pensions' Bulletin", based on a survey covering 1996/97, found that more than 70 per cent of employees were under 60 when they started to draw their pension, and more than 80 per cent were under the "normal retirement age" for their scheme. Most were in their 50s.

In the previous year's survey, two-thirds of employees retired before they reached 60.

Men are far more likely to retire early than women, the survey found. In many cases female employees were twice as likely to stay on until they reached 60. In some companies a majority of staff retire before they reach the age of 54. These include Alliance and Leicester, Imperial Tobacco and Royal Bank of Scotland, even though all have pension schemes with a normal retirement age of 60.

The fact that 3,000 more teachers retired early contributed to an increase in the total compared with the previous year's survey. This figure could fall back in the current year because favourable terms for stopping work on ill-health grounds came to an end last September.

Other public sector schemes are now considering limiting the availability of ill-health retirement on cost-cutting grounds.

IDS points out that many firms have favoured early retirement rather than redundancy because they have been able to use pension fund surpluses to finance the programmes. This has hidden the real financial cost.

"However, there has been another cost - the loss of experience," the report concludes. Many of the companies that have gone through early retirement programmes now have few employees over the age of 50.

IDS Pensions Service, Bulletin no 115, May 1998. 0171-250 3434.