Credit crunch dashes hope of giving up work

ONE in four older workers is having to abandon dreams of early retirement because the economic crisis has hit pension pots and savings.

A survey found almost a quarter of those aged 55-64 expect to postpone their retirement plans as a result of the recession.

Those who had aspired to the middle-class dream of taking it easy after 40 years in employment are now being forced to continue earning as their pension schemes, share portfolios and interest rates on savings all hit rock bottom.

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The report suggests the number of people working beyond retirement age, which is already one in ten in Scotland, is set to swell even further.

The supermarket chain Asda already employs 307 over-65s in Scotland, with other companies such as the DIY chain B&Q well known for taking on older staff.

According to the latest labour-market statistics, the proportion of men aged over 65 and women over 60 who work went up by 7.8 per cent in the past year.

That is more than the 2.3 per cent rise for 25 to 34-year-olds and 1.6 per cent for the 35-49 age group.

The details of those who now plan to keep working beyond retirement age came in a survey by the market analyst TNS Finance. It found 24 per cent of 55 to 64-year-olds intended to postpone their plans to take it easy after 40 years of work because of the recession.

The results have been put down, in part, to new anti-age-discrimination laws passed in 2006 that allow people to work beyond traditional retirement ages.

But the biggest reason is believed to be the increasing number of people denied final-salary pensions, who have had to rely on money-purchase schemes that are more sensitive to fluctuations in share prices.

Added to that, the economic crisis means interest rates on savings have plummeted after the Bank of England cut the base rate to stimulate the economy. And share portfolios have drastically lost value, leading to a decrease in dividends.

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Already one company, Nationwide Building Society, is looking to provide its staff with a new product to meet the demands of those who wish to keep working. Its flexible retirement policy extends the upper age limit of employees to 75 and waives the discretion given to employers under the 2006 Age Regulations Act to refuse any requests from over-65s to continue to work.

The survey's findings have struck a chord with business groups and unions in Scotland, who say more and more employees are abandoning their retirement plans.

The Scottish Trades Union Congress (STUC) blamed the withdrawal of final-salary pensions in the private sector and warned that would dramatically affect the health and life expectancy of older people.

Union officials have used the survey results to justify their fight to keep more generous and secure final-salary schemes in the public sector, where people are able to continue with their retirement plans.

Ian Tasker, the STUC's pensions spokesman, said: "We have warned for a long time that this would happen with the end of the final-salary pension schemes. It is one thing somebody wanting to continue to work because they enjoy it and a different thing that they are forced to work into their old age because they cannot afford to retire."

The collapse of final-salary pensions and rise of money purchase schemes has been blamed on Gordon Brown. Political opponents say that if he had not, as chancellor, taken 5 billion a year from pension schemes since the late 1990s, then people would not have to be making choices now about staying on at work.

David Mundell, the shadow Scottish secretary, said: "The results of the current economic crisis simply compound the 5 billion-a-year tax raid Gordon Brown launched on our pension funds when he was chancellor."

The results of TNS Finance's survey of 1,000 older employees matched those of the Confederation of British Industry's pension studies in Scotland, which suggested one in five workers would stay on after the normal retirement age.

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David Lonsdale, the director of CBI Scotland, argued that the fact people would choose to stay on at work was not wholly bad news, especially as people were living longer and complex rules had made pensions more costly for employers.

"It is encouraging that the new right to request postponed retirement appears to be working well," he said. "Firms want to retain employee skills and experience, while staff can enjoy a phased retirement or continue working flexibly to boost retirement savings."

Jim Mather, the enterprise minister, had sympathy for workers forced to give up their retirement plans but said it might help the Scottish economy.

He said: "No one wants to be forced to work longer than they planned to. For a variety of reasons, many people already opt to work well into retirement, but I know that employers are increasingly returning to a widespread recognition of the strengths, wisdom and experience that older employees can bring."

The plight of older British workers comes as an Icelandic radio station has heaped further embarrassment on the way the UK treats older people. It has collected thousands of items of warm clothes and shipped them over to Britain to stop pensioners dying from the cold after hearing that 260,000 British pensioners had died during the winter months over the past decade.

'Some older people are losing their pensions'

NANCY Dalziel, 72, from Edinburgh, could have retired 12 years ago but felt she had to go on working.

Part of her determination to stay in work came from a desire to make sure she had enough money to live on, a pressure she believes will only increase – on her and others – because of the credit crisis.

Ms Dalziel works three half-days and one full day every week at the B&Q store in Newcraighall, staffing the telephones.

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She enjoys her work and says it gives her the motivation she needs to keep active, but she accepts that this is no longer enough, especially in the current financial climate.

Ms Dalziel could have left the civil service at 60, but stayed on for five years and then came to work for B&Q, where she had already been working part-time for 11 years.

"Part of it is financial," she said. "There were personal circumstances starting with a new home. I had to buy a house but I would also stagnate if I stayed at home.

"This gets me up and out of bed in the morning, and I'm working with a great team.

"But the way things are looking now, things are only going to get worse for lots of older people. Working to older ages will become much more prevalent now. More people will have to work longer."

She added: "Some older people are losing their pensions. I have been quite lucky because I have a civil service pension, it's not great and I suppose I could manage if I had to, but I like to have a holiday and I like to have my car.

"If I want these things, I have to work."

Ms Dalziel has no plans to retire, at least not yet.

"Health permitting, I will be happy to stay on here. I think I may be the oldest one here, although we might be recruiting soon and other older people might start working here too," she said.

ANALYSIS: Hamish Macdonell

The longer people stay on, the harder it is to start

IT USED to be so simple – work to 60 or 65, cash in your private pension and head for a rosy retirement of cruises, crosswords and grandchildren. Well, not any more.

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The economic crisis has squeezed private pensions to such an extent that more and more older people are putting off retirement and staying in work.

While this is good in part – it helps battle against ageism in the workplace and retains accumulated knowledge in jobs and services – it is not so good for those further down the age line.

The jobs market is already contracting. There are fewer jobs for those looking for work and more and more people searching for those jobs that are available.

It is already hard enough for the jobless to find work, but what is going to happen in June when 74,000 Scottish graduates are emptied on to an already crowded jobs market?

Older people may want to stay in work for financial reasons and they may have every justification for doing so but the knock-on effects down the other end of the job market will be considerable.

It is also not as if the public sector is immune from this problem. There had been an assumption that because public-sector workers, such as teachers and civil servants, have generous state-funded final-salary pension schemes, they would continue to keep on retiring as soon as they could to enjoy their pensions without having to worry about the state of the market.

But that is no longer the case. Many teachers also invest in the markets and most have money tied up in property, both of which have been hit hard recently.

If those teachers approaching retirement stay on, it blocks the move upwards of middle-ranking teachers, preventing them from freeing up jobs for those below them and right on down the line to those at entry level.

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The figures are already stark. In November 2008, the number of unemployed teachers hit a three-year high, according to the Office for National Statistics. Also, the number of Scottish teachers claiming Jobseeker's Allowance soared from 155 in 2005 to 400 in 2008.

If this is taken together with the latest labour market statistics – which show that the proportion of men over 65 and women over 60 who work went up by 7.8 per cent in the past year, well above a 2.3 per cent increase for 25-34-year-olds and a 1.6 per cent increase for 35-49-year-olds – a bleak picture emerges.

The message seems to be: if you are in a job, keep it, however old you are. It may be a selfish attitude, but it is not hard to see why more and more people have decided to adopt it.