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.
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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.
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