The Covid-19 pandemic led to a dramatic increase in the number of over-50s leaving the workplace, new figures from the Office for National Statistics have revealed.
Over half a million people have stopped working since the pandemic began, with the vast majority (493,000) aged 50 years and over, reversing a decades-long trend of people working well into their 50s, the ONS said.
According to the data, 47% of those who left their job did so to retire, with those aged 60 years and over more likely to cite this reason (56%) than those in their 50s (28%). The data also found that 82% of those who lost or left their job during the pandemic had not returned to work.
Industry commentators described the exodus as a “blow” to the employment prospects of older workers and warned of the impact on pensions.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “After years of growth, the pandemic has dealt a huge blow to the employment prospects of older workers. Keeping older workers in the workplace has huge benefits for the employers who benefit from their experience as well as for the workers themselves who can top up their pension planning while enjoying the social aspects of work.
“If people retire at the time of their choosing, then this is hugely positive but many people are essentially compelled to leave by caring responsibilities or because they feel unable to get another role. This in turn could cause them real financial difficulties further down the line. We need to ensure the way we work is not essentially forcing older people out of the workforce and a more flexible approach may be needed.”
Stephen Lowe, group communications director at Just Group, commented: “It’s concerning to see that many people have left the workforce earlier than they had expected.
“Ideally people would retire on their own terms when the time is right and they have the resources to support themselves, but the pandemic appears to have removed that option for many” having “a serious impact on their finances in both the short and the long term.
“Not surprisingly, people leaving work during the pandemic are more likely to report increased worries around cost of living increases. It’s important that policies are put in place to encourage older workers to go back to work and to give them the support they need. A significant minority – one fifth of those aged 50-60 and a third of those 60-70 – said they had experienced age discrimination when looking for paid work.
“Those deciding to tap into their pensions and savings early in life should see advice or free guidance such as the government-backed independent and impartial Pension Wise service so they fully understand the implications.”
Those aged 60 years and over were more likely to be funding their retirement or time out of work from a private pension (66%) than those in their 50s (29%). However, examples given by AJ Bell found that a saver with a £100,000 pension pot at age 50 who withdraws £5,000 a year would risk running out of money by their 75th birthday. A 60 year old with a £100,000 pension pot withdrawing £5,000 a year could run out of money by age 85.
Tom Selby, head of retirement policy at AJ Bell, said: “As the UK emerges slowly from the pandemic and headlong into a cost of living crisis, we see an economy that has been stripped of almost half a million older workers.
“While there are various reasons for people aged 50 and over exiting the labour market, retirement remains the primary driver. For some, this retirement will be voluntary, while for others it may have been forced upon them early due to economic or personal circumstances. Unsurprisingly, those who are older are more likely to be funding their retirement or time out of work from their private pension.
“The implications of mass early retirement could be seismic and there is a real danger tens of thousands of people risk sleepwalking into hard times in later life.”
Selby said those accessing their pension early should consider the sustainability of their withdrawal strategy. They will also need to consider the impact of the money purchase annual allowance, which reduces the amount someone who has flexibly accessed taxable income from their pension can save in a pension from £40,000 to just £4,000.
Selby added: “There are ways to avoid the MPAA, including just taking your 25% tax-free cash or, for those with any pensions worth £10,000 or less, extinguishing the entire fund as a small pot lump sum.”
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