Workers who retire early could be losing a third of their pension, says DWP

The findings come as part of a new Government initiative to encourage older people to work

People who stop working 10 years before the official retirement age may risk losing a third of their pension pot, the government has revealed.

Leaving work prematurely can also affect a person’s living standards into old age, as well as being costly for the wider economy, businesses and society as a whole, according to a report on older workers published on Friday.

The report uses the example of “David” to illustrate the losses facing some people who stop working and contributing to pensions.

If "David" earns around £30,000 from the age of 25 and saves 8 per cent of his salary, alongside his employer, into a pension, he would accumulate £128,000 by pension age. But if he stopped at 55, his pension pot would be more than a third smaller – approximately £81,000.

The findings come as part of the launch of the Fuller Working Lives initiative which has been welcomed by campaigners. It focuses on encouraging older people who have suffered poor health or been made redundant to remain or return to the workplace, rather than people who can afford to leave work early.

The report comes while the UK employment rate for those aged between 55 and 64 is around 60 per cent, and rising.

But despite this positive trend, the report argues that while some of the remaining 40 per cent people look forward to retirement, others can be see their lives affected by boredom, loneliness and poverty.

Read more: Should we go Dutch with our pensions?
Local government pensions cash pulled from hedge fund
Struggling pensioners not getting their benefits
New pension system will be a shock for millions

The Department for World and Pensions predicts that the economy could have been boosted by £18 billion in 2013 if the employment gap between people in their 40s and those aged 50 to State Pension age was halved.

The plan involves extending the right to request flexible working to all employees this month; the appointment of a so-called “Older Workers’ Employment Champion”; and launching a new Health and Work Service to support workers will long-term health problems.

Caroline Abrahams, Charity Director at Age UK said of the initiative: “Too many older people still find themselves locked out of the workplace despite overwhelming evidence showing they are at least as productive as their younger counterparts and make an invaluable  contribution in terms of their experience, knowledge and skill.

“Yet nearly half of all unemployed people aged 50 and over have been out of work for more than a year  according to the latest figures, with many in this age group finding it incredibly hard to get another job.

“We are pleased to see this framework for action as there’s a pressing need for Government to do more to challenge and support employers to consign age discrimination to the past, encouraging them to recruit more older workers.

“With the rising state pension age, these changes are essential if we are to ensure we don’t have future generations of older people who are excluded from work and who struggle to make ends meet.”

Pensions Minister Steve Webb said: “Older workers have a huge amount to bring to any workforce and are a vast untapped talent. We are living longer and can expect many more years of healthy life. It’s great news – but it’s something that as a society and as an economy we need to respond to.

“The business case is compelling and the research we are launching today sets out clearly the advantages for individuals, employers and the state.

“As part of building a fairer society, I am determined that we boost our support for older workers and help employers challenge outdated perceptions to see the real strengths of this important section of the workforce," he added.

Life and Style
A teenager boy wakes up.
life
Life and Style
It is believed that historically rising rates of alcohol consumption have contributed to the increase
food + drink
Voices
The erotic novel Fifty Shades of Grey has already been blamed for a rise in the number of callouts to the fire brigade for people trapped in handcuffs
voicesJustine Elyot: Since Fifty Shades there's no need to be secretive about it — everyone's at it
Arts and Entertainment
Critics say Kipling showed loathing for India's primitive villagers in The Jungle Book
filmChristopher Walken, Bill Murray, Scarlett Johanssen Idris Elba, Andy Serkis, Benedict Cumberbatch, Cate Blanchett and Christian Bale
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
Playing to win: for Tanith Carey, pictured with Lily, right, and Clio, even simple games had to have an educational purpose
lifeTanith Carey explains what made her take her foot off the gas
Arts and Entertainment
The White Sails Hospital and Spa is to be built in the new Tunisia Economic City.
architectureRussian billionaire designs boat-shaped hospital for new Dubai-style Tunisia Economic City
Arts and Entertainment
You could be in the Glastonbury crowd next summer if you follow our tips for bagging tickets this week
music
Sport
Husain Abdullah returns an interception off Tom Brady for a touchdown
nflLeague has rules against 'sliding to ground on knees'
Life and Style
tech
Extras
indybest
Life and Style
food + drink
News
i100
News
i100
Arts and Entertainment
Kylie performs during her Kiss Me Once tour
musicReview: 26 years on from her first single, the pop princess tries just a bit too hard at London's O2
Arts and Entertainment
film
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Java Developer - web services, XML and API

£330 - £350 Per Day: Clearwater People Solutions Ltd: Our client based in Lond...

Maths Teacher

Negotiable: Randstad Education Reading: Maths Teacher required to teach Furthe...

Primary teachers required for schools in Norwich

£21000 - £35000 per annum: Randstad Education Cambridge: Primary teachers requ...

Trainee Helpdesk Analyst / 1st Line Application Support Analyst

£18000 per annum: Ashdown Group: An established and growing IT Consultancy fir...

Day In a Page

Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

Isis an hour away from Baghdad -

and with no sign of Iraq army being able to make a successful counter-attack
Turner Prize 2014 is frustratingly timid

Turner Prize 2014 is frustratingly timid

The exhibition nods to rich and potentially brilliant ideas, but steps back
Last chance to see: Half the world’s animals have disappeared over the last 40 years

Last chance to see...

The Earth’s animal wildlife population has halved in 40 years
So here's why teenagers are always grumpy - and it's not what you think

Truth behind teens' grumpiness

Early school hours mess with their biological clocks
Why can no one stop hackers putting celebrities' private photos online?

Hacked photos: the third wave

Why can no one stop hackers putting celebrities' private photos online?
Royal Ballet star dubbed 'Charlize Theron in pointe shoes' takes on Manon

Homegrown ballerina is on the rise

Royal Ballet star Melissa Hamilton is about to tackle the role of Manon
Education, eduction, education? Our growing fascination with what really goes on in school

Education, education, education

TV documentaries filmed in classrooms are now a genre in their own right
It’s reasonable to negotiate with the likes of Isis, so why don’t we do it and save lives?

It’s perfectly reasonable to negotiate with villains like Isis

So why don’t we do it and save some lives?
This man just ran a marathon in under 2 hours 3 minutes. Is a 2-hour race in sight?

Is a sub-2-hour race now within sight?

Dennis Kimetto breaks marathon record
We shall not be moved, say Stratford's single parents fighting eviction

Inside the E15 'occupation'

We shall not be moved, say Stratford single parents
Air strikes alone will fail to stop Isis

Air strikes alone will fail to stop Isis

Talks between all touched by the crisis in Syria and Iraq can achieve as much as the Tornadoes, says Patrick Cockburn
Nadhim Zahawi: From a refugee on welfare to the heart of No 10

Nadhim Zahawi: From a refugee on welfare to the heart of No 10

The Tory MP speaks for the first time about the devastating effect of his father's bankruptcy
Witches: A history of misogyny

Witches: A history of misogyny

The sexist abuse that haunts modern life is nothing new: women have been 'trolled' in art for 500 years
Shona Rhimes interview: Meet the most powerful woman in US television

Meet the most powerful woman in US television

Writer and producer of shows like Grey's Anatomy, Shonda Rhimes now has her own evening of primetime TV – but she’s taking it in her stride
'Before They Pass Away': Endangered communities photographed 'like Kate Moss'

Endangered communities photographed 'like Kate Moss'

Jimmy Nelson travelled the world to photograph 35 threatened tribes in an unashamedly glamorous style