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.

News
Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
Sport
Arsenal supporters gather for a recent ‘fan party’ in New Jersey
football
Sport
sportDidier Drogba returns to Chelsea on one-year deal
Arts and Entertainment
The Secret Cinema performance of Back to the Future has been cancelled again
film
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Life and Style
Balmain's autumn/winter 2014 campaign, shot by Mario Sorrenti and featuring Binx Walton, Cara Delevingne, Jourdan Dunn, Ysaunny Brito, Issa Lish and Kayla Scott
fashionHow Olivier Rousteing is revitalising the house of Balmain
News
people
Arts and Entertainment
Christian Grey cradles Ana in the Fifty Shades of Grey film
filmFifty Shades of Grey trailer provokes moral outrage in US
News
BBC broadcaster and presenter Evan Davis, who will be taking over from Jeremy Paxman on Newsnight
peopleForget Paxman - what will Evan Davis be like on Newsnight?
Life and Style
fashionCustomer complained about the visibly protruding ribs
Voices
The new dawn heralded by George Osborne has yet to rise
voicesJames Moore: As the Tories rub their hands together, the average voter will be asking why they're not getting a piece of the action
Sport
Dejan Lovren celebrates scoring for Southampton although the goal was later credited to Adam Lallana
sport
News
newsComedy club forced to apologise as maggots eating a dead pigeon fall out of air-conditioning
Arts and Entertainment
Jo Brand says she's mellowed a lot
tvJo Brand says shows encourage people to laugh at the vulnerable
Life and Style
People may feel that they're procrastinating by watching TV in the evening
life
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
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

Senior Risk Manager - Banking - London - £650

£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

Commercial Litigation Associate

Highly Attractive Package: Austen Lloyd: CITY - COMMERCIAL LITIGATION - GLOBAL...

Systems Manager - Dynamics AX

£65000 - £75000 per annum + Benefits: Progressive Recruitment: The client is a...

Service Delivery Manager (Software Development, Testing)

£40000 - £45000 per annum: Ashdown Group: A well-established software house ba...

Day In a Page

Evan Davis: The BBC’s wolf in sheep’s clothing to take over at Newsnight

The BBC’s wolf in sheep’s clothing

What will Evan Davis be like on Newsnight?
Finding the names for America’s shame: What happens to the immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert?

Finding the names for America’s shame

The immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert
Inside a church for Born Again Christians: Speaking to God in a Manchester multiplex

Inside a church for Born Again Christians

As Britain's Anglican church struggles to establish its modern identity, one branch of Christianity is booming
Rihanna, Kim Kardashian and me: How Olivier Rousteing is revitalising the house of Balmain

Olivier Rousteing is revitalising the house of Balmain

Parisian couturier Pierre Balmain made his name dressing the mid-century jet set. Today, Olivier Rousteing – heir to the house Pierre built – is celebrating their 21st-century equivalents. The result? Nothing short of Balmania
Cancer, cardiac arrest, HIV and homelessness - and he's only 39

Incredible survival story of David Tovey

Tovey went from cooking for the Queen to rifling through bins for his supper. His is a startling story of endurance against the odds – and of a social safety net failing at every turn
Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little